Grieve Electronics has been undergoing rapid
Grieve Electronics has been undergoing rapid growth for the last few years. The current dividend per share is expected to grow at a rapid rate of 20% a year for the next three years. After that time, Grieve’s dividend growth is expected to slow to a more normal rate of 7% a year for an indefinite future. Because of the risk involved with such a rapid growth, the required rate of return on the stock is 22%. Calculate today’s theoretical (fair) price of the stock. Hint: Use the 20% dividend growth rate to calculate the expected dividends for the first three years: D1, D2, and D3
For any questions, feedback, or comments, we have an ethical customer support team that is always waiting on the line for your inquiries.