Sawchuck Consulting has been profitable for the last 5 years, but it has never paid a dividend. Management has indicated
Posted: Wed Jul 06, 2022 6:28 pm
Sawchuck Consulting has been profitable for the last 5 years,but it has never paid a dividend. Management has indicated that itplans to pay a $0.25 dividend 3 years from today, then to increaseit at a relatively rapid rate for 2 years, and then to increase itat a constant rate of 8.00% thereafter. Management's forecast ofthe future dividend stream, along with the forecasted growth rates,is shown below. Assuming a required return of 11.00%, what is yourestimate of the stock's current value?
Year 0 1 2 3 4 5 6
Growth rate NA NA NA NA 50.00% 25.00% 8.00%
Dividends $0.000 $0.000 $0.000 $0.250 $0.375 $0.469 $0.506
a. $10.99 b. $9.94 c. $10.72 d. $10.19 e. $10.45
Year 0 1 2 3 4 5 6
Growth rate NA NA NA NA 50.00% 25.00% 8.00%
Dividends $0.000 $0.000 $0.000 $0.250 $0.375 $0.469 $0.506
a. $10.99 b. $9.94 c. $10.72 d. $10.19 e. $10.45