Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend...

Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend of $7.10. You believe that dividends will grow at a rate of 16.0% per year for two years, and then at a rate of 10.0% per year thereafter. You expect the stock will sell for $40.42 in two years. You expect an annual rate of return of 23.0% on this investment. If you plan to hold the stock indefinitely, what is the most you would pay for the stock now?

Expert Solution

Most you wpuld pay now	39.73
Statemnet showing Current Price
Particulars	Time	PVf 23%	Amount	PV
Cash inflows (Dividend)	1.00	0.8130	8.2360	6.70
Cash inflows (Dividend)	2.00	0.6610	9.5538	6.31
Cash inflows (Price)	2.00	0.6610	40.42	26.72
Current Price of Stock				39.73

jeff jeffy answered 8 months ago

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