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In: Finance

Your friend is worried about his job security and wants to create a startup company. Perhaps...

Your friend is worried about his job security and wants to create a startup company. Perhaps surprisingly, he is able to take his startup to IPO within a 5-year period. The firm has just announced its first dividend of $3/share and the firm’s dividend is expected to grow extremely fast for 4 years in a row at 30% each year. However, he expects that the company will only grow at 5% after that forever. Expected return (discount rate) for stocks is 12%. Please use the dividend discount model to price the stock at t=0.

a) $99.34

b) $69.59

c) $92.81

d) $87.65

e) $103.21

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER : a) $99.34

jeff jeffy answered 1 year ago
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