Assume that the average firm in your companys industry is expected to grow at a constant rate

Question:

Assume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 25% the following year, after which growth should return to the 6% industry average. If the last paid (D0) was $1, what is the value per share of your firm’s stock?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...