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ABC is a young start-up company. No dividends will be paid on the stock over the...

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Finance

ABC is a young start-up company. No dividends will be paid onthe stock over the next 3 years because the firm needs to plow backits earnings to fuel growth. The company plans to pay a $6 pershare dividend in 4 years and will increase the dividend by 4percent per year thereafter. What is the current share price if therequired return on this stock is 16 percent?

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4.4 Ratings (766 Votes)
answer is 3203 Here we have a stock that pays no dividends for 4 years Once the stock begins paying dividends it will have a constant growth rate of dividends We can use the    See Answer
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ABC is a young start-up company. No dividends will be paid onthe stock over the next 3 years because the firm needs to plow backits earnings to fuel growth. The company plans to pay a $6 pershare dividend in 4 years and will increase the dividend by 4percent per year thereafter. What is the current share price if therequired return on this stock is 16 percent?

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