How long will its supernormal rate of growth

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The Highrise Investment Co. (an all-equity firm) currently pays a dividend of $2.00 per share, which is 75% of its after-tax cash flows from operations. It is currently selling for $16 a share and earns 40% on invested capital.

Its equity /3 is 2.0, the expected market rate of return is 12.5%, and the risk-free rate is 57g.

How long will its supernormal rate of growth last before it levels off to equal the normal rate for a company with its risk?

Reference no: EM131247398

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