Calculate what the stock should sell for five years from now

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Reference no: EM131299990

The Matador Restoration Co. is facing continually decreasing revenues due to the ever-shrinking population of people who want to restore vintage AMC Matadors. Based on the most recent earnings forecasts, management anticipates that dividends will decline at a rate of 20% for three years. Thereafter, Div4 will equal Div3, Div5 will equal Div4, and so on forever. The firm just paid a dividend of $2.50 and the required return on the stock is 16%. a. At what price should the stock sell for today? b. Calculate what the stock should sell for 5 years from now.

Reference no: EM131299990

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