Nonconstant growth-what constant rate is stock expected

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Nonconstant growth

Carnes Cosmetics Co.'s stock price is $59.82, and it recently paid a $1.25 dividend. This dividend is expected to grow by 21% for the next 3 years, then grow forever at a constant rate, g; and rs = 16%. At what constant rate is the stock expected to grow after Year 3? Round your answer to two decimal places. Do not round your intermediate calculations.

____________%

Nonconstant growth

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 27% per year - during Years 4 and 5; but after Year 5, growth should be a constant 4% per year. If the required return on Computech is 16%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.

__________$

Reference no: EM132023394

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