The Yubaba Company has so far not paid a dividend on its stock. Investors believe...
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The Yubaba Company has so far not paid a dividend on its stock. Investors believe that the Company wont pay a dividend next year, but that it will pay dividends starting two years from now. The dividend then is expected to be $0.20 per share. Three years from now the dividend is expected to be $0.50 per share, and four years from now its expected to be $0.75 per share. Thereafter the dividend is expected to grow at a constant rate = 4% per year. Investors require a minimum annual rate of return on Yubaba stock = 13%.
a) What is your estimate of Yubabas stock price four years from now?
b) What is your estimate of Yubabas stock price today?
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