Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years,...

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Agarwal Technologies was founded 10 years ago. It has beenprofitable for the last 5 years, but it has needed all of itsearnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3years from today, then to increase it at a relatively rapid ratefor 2 years, and then to increase it at a constant rate of 8.00%thereafter. Management's forecast of the future dividend stream,along with the forecasted growth rates, is shown below. Assuming arequired return of 11.00%, what is your estimate of the stock'scurrent value?
Year: 0 1 2 3 4 5 6
Growth rate: NA NA NA NA 30.00% 15.00% 8.00%
Dividends: $0.000 $0.000 $0.000 $0.250 $0.325 $0.374 $0.404?
Question options: $8.60 $9.29 $10.50 $9.21 $10.75

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current value of stock present value of dividends stream where discounting rate is the requireds rate of return of 11 step1 calculate present value of explicit forecast period of 5 years See Answer

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Agarwal Technologies was founded 10 years ago. It has beenprofitable for the last 5 years, but it has needed all of itsearnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3years from today, then to increase it at a relatively rapid ratefor 2 years, and then to increase it at a constant rate of 8.00%thereafter. Management's forecast of the future dividend stream,along with the forecasted growth rates, is shown below. Assuming arequired return of 11.00%, what is your estimate of the stock'scurrent value?Year: 0 1 2 3 4 5 6Growth rate: NA NA NA NA 30.00% 15.00% 8.00%Dividends: $0.000 $0.000 $0.000 $0.250 $0.325 $0.374 $0.404?Question options: $8.60 $9.29 $10.50 $9.21 $10.75