Question

Asked Dec 8, 2019

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Synovec Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 14 percent, and the stock currently sells for $72 per share. What is the projected dividend for the coming year?

Step 1

**Calculation of Projected Dividends:**

The projected dividends are** $3.12.**

Since there is no dividends provided here, it is necessary to calculate the dividends for the coming year where there is a different growth rate for each year. Since we have the stock price, required return and growth rate of dividends, it is necessary to calculate the dividends in year 3 which is shown below,

Step 2

**Calculate the dividends for year 4 with a growth rate of 15% which is shown below:**

Step 3

**Calculate the price in year 4 where post year 4 the stock will grow by 8% ind...**

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