Blossom, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the...

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Blossom, Inc., is a fast-growing technology company. Managementprojects rapid growth of 30 percent for the next two years, then agrowth rate of 17 percent for the following two years. After that,a constant-growth rate of 8 percent is expected. The firm expectsto pay its first dividend of $2.25 a year from now. If dividendswill grow at the same rate as the firm and the required rate ofreturn on stocks with similar risk is 15 percent, what is thecurrent value of the stock? (Round all intermediatecalculations and final answer to 2 decimal places, e.g.15.20.)

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4.1 Ratings (482 Votes)

Step1 Calculation of Dividend per share for the next 5 years Dividend in Year 1 D1 225 per share Dividend in Year 2 D2 29250 per share 225 x 130 Dividend in Year 3 D3 38025 per share 29250 x 130 See Answer

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Blossom, Inc., is a fast-growing technology company. Managementprojects rapid growth of 30 percent for the next two years, then agrowth rate of 17 percent for the following two years. After that,a constant-growth rate of 8 percent is expected. The firm expectsto pay its first dividend of $2.25 a year from now. If dividendswill grow at the same rate as the firm and the required rate ofreturn on stocks with similar risk is 15 percent, what is thecurrent value of the stock? (Round all intermediatecalculations and final answer to 2 decimal places, e.g.15.20.)