Emma Incorporated expects non-normal dividend growth over the next three years; that is a 0% growth rate in the first year,then 25%,and then 12% followed by growth of 8% thereafter.If the last dividend paid was $2.50 and the appropriate discount rate is 12%; what is the price of the stock today?

Question

Quizplus · Accepted Answer

D₁= 2.50 D₂= 3.13 D₃= 3.50 D₄= 3.78 P₃= D₄/(r-g) P₃= 94.50 PVD₁= 1.99 PVD₂= 2.49 PVD₃= 2.49 PVP₃= 67.26 P₀= 74.24

Emma Incorporated Expects Non-Normal Dividend Growth Over the Next Three