Question: The Wonder Products Company is expanding fast and therefore will
The Wonder Products Company is expanding fast and therefore will not pay any dividends for the next 3 years. After that, starting at the end of year 4, it will pay a dividend of $0.75 per share to its common shareholders and increase it by 12% each year until it pays $1.50 at the end of year 10. After that it will pay $1.50 per year forever. If an investor wants to earn 15% per year on this investment, how much should he pay for the stock?
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