ABC Corporation is a growing company which is expected to pay dividends per share according to following scheme : $ 2 in one year , $ 3.5 in two years , and $ 5 in three years . After that , its dividends are expected to grow at constant rate of 5 % per year forever ( so dividend for year 4 will be 5 % more previous year's dividend , etc. ) . Answer following questions assuming ABC's equity cost of capital is 11%

What would be the expected price of ABC's shares right after the company pays the year three dividends ?

2: How much would an investor pay for one share of ABC's equity now , considering the company's current dividend payout scheme provided above ?

Answer rating: 100% (QA)

To calculate the expected price of ABCs shares right after the company pays the year three dividends ... View the full answer