Concamera Optiplex is going through a period where their expansion plans result

Question

Concamera Optiplex is going through a period where their expansion plans result in a skewed growth for the next three years. They plan to pay a dividend of $0.50 per share in the next year and the year after that (d1 and d2). Following that they expect to pay $0.525 in dividend in year 3 (a growth rate of 5% over year 2). After year 3 (from year 4) they expect a constant growth rate of 10%. What would be the value of the company's stock today if the required rate of return for the equity investor is 15%? $8.75 $11.55 $75.00 $16.35 Please show work if possible.

Explanation / Answer

0.50/1.15 + 0.50/1.15^2 + 0.525/1.15^3 + (0.525*1.1/0.15-0.10)/1.15^3 = $8.75

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