Up&Down company is expected to go through multiple expansion phases before it reaches maturity stage. Its dividend today is $5. The dividends are expected to grow by 3% each year for the next 3 years and 2% for the following two years. Then the company is hit by the pandemic at the end of the Year 5 and its growth rate drops to -5% for the next 2 years. The pandemic ends at the end of Year 7 and then the dividend growth bounces back to zero thereafter and stays at zero forever. What is the stock price of Up&Down if the discount rate r = 5%?

Answer rating: 100% (QA)

To calculate the stock price of UpDown company we can use the dividend discount model The formula f... View the full answer