Alpha Com. just announced its earnings per share of $6 yesterday, and the company currently pays no dividend, but the company plans to pay out its first annual dividend in 4 years by distributing 50% of its earnings to shareholders and expects the payout policy to continue into the foreseeable future. An analyst expects Alpha's earnings to grow at 12% per year in the following three years. After that, the earnings will grow at 8% per year for five years and then slow down to 2% forever. 

How much is the price of a share of Alpha if the discount rate is 12% (EAR)?

Answer rating: 100% (QA)

To calculate the price of a share of Alpha using the dividend discount model DDM and the given infor... View the full answer