Suppose a firm has a current dividend of D 0 $5, which is expected to shrink at the rate g 1 10 percent for T 5 years and thereafter grow at the rate g 2 4 percent With a discount rate of k 10 percent, what is the value of the stock ...

Using the twostage model the stock price today P 0 is ...

Suppose a firm has a current dividend of D 0 = $5, which is expected to shrink

Question:

Suppose a firm has a current dividend of D₀ = $5, which is expected to “shrink” at the rate g₁ = −10 percent for T = 5 years and thereafter grow at the rate g₂ = 4 percent. With a discount rate of k = 10 percent, what is the value of the stock?

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