Cloud Storage Ltd is a fast-growing technology company.The company projects a rapid growth of 40 percent for the next two years and then a growth rate of 20 percent for the following two years.After that,the company expects a constant-growth rate of 8 percent.The company expects to pay its first dividend of $1.25 a year from now.If your required rate of return on such shares is 20 percent,what is the current price of the share?

Question

Quizplus · Accepted Answer

The correct answer is A because the current price of the share is $15.63. This is calculated using the dividend discount model, which takes into account the expected dividends and the required rate of return.

Cloud Storage Ltd Is a Fast-Growing Technology Company