Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations.Do not round your intermediate calculations. $$\begin{array} { l r r r r r r r }
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \
\hline \text { Growth rate } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & 90.00 \% & 45.00 \% & 8.00 \% \
\text { Dividends } & \$ 0.000 & \$ 0.000 & \$ 0.000 & \$ 0.250 & \$ 0.475 & \$ 0.689 & \$ 0.744
\end{array}$$
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Question

Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations.Do not round your intermediate calculations. $$\begin{array} { l r r r r r r r } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \
\hline \text { Growth rate } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & 90.00 \% & 45.00 \% & 8.00 \% \
\text { Dividends } & \$ 0.000 & \$ 0.000 & \$ 0.000 & \$ 0.250 & \$ 0.475 & \$ 0.689 & \$ 0.744
\end{array}$$
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Quizplus · Accepted Answer

The Answer of Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations.Do not round your intermediate calculations. $$\begin{array} { l r r r r r r r } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \
\hline \text { Growth rate } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & \mathrm { NA } & 90.00 \% & 45.00 \% & 8.00 \% \
\text { Dividends } & \$ 0.000 & \$ 0.000 & \$ 0.000 & \$ 0.250 & \$ 0.475 & \$ 0.689 & \$ 0.744
\end{array}$$
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Agarwal Technologies Was Founded 10 Years Ago ? A) $15

Agarwal Technologies Was Founded 10 Years Ago ?
A) $15