What is the expected value of your firm stock

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Reference no: EM131936463

Question: Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% per year and the average dividend yield is 7%. Your company is about as risky as the average firm in the industry. Your firm has just completed some R & D work that leads you to expect that its earnings and dividends will grow at a rate of 50% for the upcoming year and 25% the following year. After these two years of rapid growth you expect your firm's earnings and dividends to grow at a sustained rate of 6%. The last dividend paid by your firm was $1.00. What is the expected value of your firm's stock? (Draw a cash flow diagrams) P_0 = $25.03 This is the opportunity cost from the perspective of any investor that may want to buy the stock of any firm in this industry and thus it is the required ROR (r_s) for this particular firm.

Reference no: EM131936463

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