Rogers Robotics currently (2009) does not pay a dividend. However, the company is expected to pay a $1.00 dividend two years from today (2011). The dividend is then expected to grow at a rate of 20 percent a year for the following three years. After the dividend is paid in 2014, it is expected to grow forever at a constant rate of 7 percent. Currently, the risk-free rate is 6 percent, market risk premium (rM - rRF) is 5 percent, and the stock's beta is 1.4. What should be the price of the stock today?
A) $22.91
B) $21.20
C) $30.82
D) $28.80
E) $20.16

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The Answer of Rogers Robotics currently (2009) does not pay a dividend. However, the company is expected to pay a $1.00 dividend two years from today (2011). The dividend is then expected to grow at a rate of 20 percent a year for the following three years. After the dividend is paid in 2014, it is expected to grow forever at a constant rate of 7 percent. Currently, the risk-free rate is 6 percent, market risk premium (rM - rRF) is 5 percent, and the stock's beta is 1.4. What should be the price of the stock today?
A) $22.91
B) $21.20
C) $30.82
D) $28.80
E) $20.16

Rogers Robotics Currently (2009) Does Not Pay a Dividend