The directors of MJ Inc. expect to pay a dividend of $2.00 (annual) a year from today. It is estimated that during the next four years (i.e. years 2 through 5), the dividend will grow at an annual rate of 16 per cent (i.e. g₁ = 16 per cent). After that, the growth rate (g₂) will be equal to 12 per cent per year and continue at that rate indefinitely. Calculate the present value of the MJ's stock if the required rate of return is 15 per cent.

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The Answer of The directors of MJ Inc. expect to pay a dividend of $2.00 (annual) a year from today. It is estimated that during the next four years (i.e. years 2 through 5), the dividend will grow at an annual rate of 16 per cent (i.e. g₁ = 16 per cent). After that, the growth rate (g₂) will be equal to 12 per cent per year and continue at that rate indefinitely. Calculate the present value of the MJ's stock if the required rate of return is 15 per cent.

The Directors of MJ Inc