About the miraculous recovery

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Reference no: EM13951516

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by 50 percent a year for another 2 years. Then they expect dividends to increase by 20 percent a year for another 2 years. After the fifth year, dividend growth is expected to settle down to a more moderate long-term growth rate of 6 percent. If the firm’s investors expect to earn a return of 14 percent on this stock, what must be its price? Please show your work.

Reference no: EM13951516

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