Computing the expected dividends

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New Light Corporation has just created a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, New Light is expected to experience a 15% yearly growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology and New Light's growth rate will slow to 5% per year indefinitely. Stockholders require a return of 12% on New Light's stock. The most recent annual dividend (D0) which was paid yesterday was $2.75 per share.

a. What are the expected dividends for years 1 to 5?
b. What is the intrinsic value of the stock (P0)?
c. What are the dividend yield, capital gains yield and the expected total return for year 1?


Reference no: EM1374609

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