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The Club Auto Company has just recently been organized. It is expected to experience no growth for the next two years as it identifies its market and acquires its inventory. Club will pay its first dividend at the end of year two of $1.60 per share. In year 3, Club's dividend is expected to grow at an annual rate of 15% and at 20% in years 4 and 5. Following year 5, Club's growth rate will reduce to 10% which it will sustain thereafter. Investors require a 16% rate of return on Club's stock.
What is the horizon value of Club's stock? O $53.46 O $54.74 $57.56 $48.58
Compute the intrinsic value of Club's stock. $27.98 $31.62 $24.35 $26.77