Nonconstant Growth Stock Valuation Assume that the average firm in your company's industry is expected to...

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Nonconstant Growth Stock Valuation Assume that the average firmin your company's industry is expected to grow at a constant rateof 7% and that its dividend yield is 5%. Your company is about asrisky as the average firm in the industry and just paid a dividend(D0) of $2.25. You expect that the growth rate of dividends will be50% during the first year (g0,1 = 50%) and 20% during the secondyear (g1,2 = 20%). After Year 2, dividend growth will be constantat 7%. What is the estimated value per share of your firm’s stock?Do not round intermediate calculations. Round your answer to thenearest cent.

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Calculation of cost of equityke Let the price of one share in the industry be100 Hence Dividend shall be 5ie5of 100 P0D1keg where P0price of share now D1 See Answer

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Nonconstant Growth Stock Valuation Assume that the average firmin your company's industry is expected to grow at a constant rateof 7% and that its dividend yield is 5%. Your company is about asrisky as the average firm in the industry and just paid a dividend(D0) of $2.25. You expect that the growth rate of dividends will be50% during the first year (g0,1 = 50%) and 20% during the secondyear (g1,2 = 20%). After Year 2, dividend growth will be constantat 7%. What is the estimated value per share of your firm’s stock?Do not round intermediate calculations. Round your answer to thenearest cent.