The earnings and dividends of Ned Computer Co. are expected to grow at an annual rate...

The earnings and dividends of Ned Computer Co. are expected to grow at an annual rate of 15 percent over the next 4 years and then slow to a constant growth rate of 8 percent per year. Ned currently pays a dividend of $1 per share. What is the value of Ned stock to an investor who requires a 12 percent rate of return?

Hints: 1) Calculate dividend for year 1 ~ 4 2) Terminal value at the end of year 4 3) Current price is the sum of pv of dividend and terminal value.

Expert Solution

jeff jeffy answered 2 years ago

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