The CEO of ABC Corp believes that each share of ABC will pay a dividend of $2.40 at the end of the current year, $3.25 next year, and $4.40 the following year. After that dividends should grow at a steady rate of 10% a year for the following 5 years. Then the growth rate should drop to 3% for the foreseeable future.
a. Given an opportunity cost of 12% annually, what is the value of each ABC share?
b. What percent of share value is accounted for by the first three dividends?
(Manually Calculate)