Assume that the average firm in your company's industry is expected to grow at a constant rate of 5 percent, and its dividend yield is 4 percent. Your company is about as risky as the average firm in the industry, but it has just developed a line of innovative new products which leads you to expect that its earnings and dividends will grow at a rate of 40 percent (D1 = D0(1 + g) = D0(1.40)) this year and 25 percent the following year, after which growth should match the 5 percent industry average rate. The last dividend paid (D0) was $2. What is the value per share of your firm's stock?
A) $ 42.60
B) $ 82.84
C) $ 91.88
D) $101.15
E) $110.37

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The Answer of Assume that the average firm in your company's industry is expected to grow at a constant rate of 5 percent, and its dividend yield is 4 percent. Your company is about as risky as the average firm in the industry, but it has just developed a line of innovative new products which leads you to expect that its earnings and dividends will grow at a rate of 40 percent (D1 = D0(1 + g) = D0(1.40)) this year and 25 percent the following year, after which growth should match the 5 percent industry average rate. The last dividend paid (D0) was $2. What is the value per share of your firm's stock?
A) $ 42.60
B) $ 82.84
C) $ 91.88
D) $101.15
E) $110.37

Assume That the Average Firm in Your Company's Industry Is