Charlie’s Computer Corporation (CCC) is growing rapidly and expects to continue to grow at 20% per...

Charlie’s Computer Corporation (CCC) is growing rapidly and expects to continue to grow at 20% per year for the next two years, 10% for the year after and then stabilize to 6% annual growth. CCC doesn’t currently pay dividends but expects to pay a $2 per share dividend one year from today. If the appropriate discount rate is 12%, then what is the value of a share of CCC stock?

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Expert Solution

Price of company= (Present value of all future dividend)

= (2/1.12)+2.4/(1.12)^2+(2.64/(1.12)^3+((2.64/(12%-6%))/(1.12)^3

= (1.79+1.91+1.88+33.20)

= $38.78

jeff jeffy answered 2 years ago

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