Utech Inc. is a startup company which must reinvest in itself heavily in the near future. Specifically, Utech can only afford to pay a dividend every three years for the next nine years. The company plans to pay a dividend of $9 three years from today. The dividend in year six is expected to be 173% of the dividend paid in year three. The dividend in year nine is expected to be 137% of the dividend paid in year six. Dividends are expected to grow at a constant rate 4% thereafter. Find the value of the stock today if you require a 13% rate of return?

Utech Inc. is a startup company which must reinvest in itself heavily in the near future. Specifically, Utech can only afford to pay a dividend every three years for the next nine years. The company plans to pay a dividend of $9 three years from today. The dividend in year six is expected to be 173% of the dividend paid in year three. The dividend in year nine is expected to be 137% of the dividend paid in year six. Dividends are expected to grow at a constant rate 4% thereafter. Find the value of the stock today if you require a 13% rate of return?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 4P

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