As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, gro

[answerhappygod]

As companies evolve, certain factors can drive sudden growth.
This may lead to a period of nonconstant, or variable, growth. This
would cause the expected growth rate to increase or decrease,
thereby affecting the valuation model. For companies in such
situations, you would refer to the variable, or nonconstant, growth
model for the valuation of the company’s stock. Consider the case
of Portman Industries: Portman Industries just paid a dividend of
$3.12 per share. The company expects the coming year to be very
profitable, and its dividend is expected to grow by 16.00% over the
next year. After the next year, though, Portman’s dividend is
expected to grow at a constant rate of 3.20% per year. Assuming
that the market is in equilibrium, use the information just given
to complete the table.
Dividends one year from now (D₁)
The risk-free rate (rRFrRF) is 4.00%, the market risk premium
(RPMRPM) is 4.80%, and Portman’s beta is 1.30.
What is the expected dividend yield for Portman’s stock
today?
7.03%
5.62%
7.51%
6.81%