Connie’s Cupcakes is expecting unusual growth in the next three years. Connie is estimating that dividends will be $3.00, then $2.00, then $4.00 per share. After that, Connie expects growth to be constant at 3% indefinitely. The rate expected in the marketplace for stocks such as Connie’s is 5.5%.
What is the value of a share of Connie’s Cupcakes today? _____________
What will be the value of a share in year 4? ________________
What will be the value of a share in year 5? ________________