Problem
• Winters Inc., a golf club manufacturer, is currently paying dividends of $3.5 per share. These dividends are expected to grow at a 15% rate for the next four years and at a 3% rate thereafter (forever). What is the value of the stock if the appropriate discount rate is 12%?
• The ABX News Co. paid the last dividend (D0) of $1.5/share, and the dividend is expected to grow at a rate of 12% over the next 4 years. It will then grow at a normal, constant rate of 2% for the future. The rate of return is 10%. What should the stock price be today?