Question: ( 5 points ) Pepper is a young start - up company. No dividends will be paid on the stock over the next four years

(5

points

)

Pepper is a young start

-

up company. No dividends will be paid on the stock over the next four years because the firm needs to plowback its earnings to future growth. The company will pay a $

1.25

per share dividend in

5

years and will increase the dividend by

10

percent per year for

5

years, with the growth rate falling off to a constant

6

percent thereafter. If the required retum is

12

percent. The market price of Pepper is $

13

per share currently.

.

What is the current share price?

.

Is the stock overpriced, underpriced, or fair priced? What is your investment strategy on Pepper's stock?

(5 points) Pepper is a young start-up company. No dividends will

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