Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over
Question:
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $11 per share exactly 10 years from today and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 12 percent, what is the current share price?(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Below is my equation but it is flawed. Can you show me where I made a mistake?
(11/1+.12 = 9.821) + (11/1+.12^2 =8.769) + (11/1+.12^3 =7.829) + (11/1+.12^4 = 6.9906) + (11/1+.12^5 = 6.2416) + (11/1+.12^6=5.572) + (11/1+.12^7) + (11/1+.12^8) + (11/1+.12^9) + (11/1+.12^10)
= 62.152
(11*1.04)/(.12-.04)= 143
143+62.152 = 205.15