Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 50% per year - during Years 4 and 5; but after Year 5, growth should be a constant 7% per year. If the required return on Microtech is 15%, what is the value of the stock today?

Answer rating: 100% (QA)

Let D n be the dividend in Year n r be the interest rate and g be th... View the full answer