Chapter $8$

Stock Valuation

Please show your work.

In order to buy back its own shares, XYZ$,$ Inc. has decided to suspend its dividends for the next three years. It will resume its annual cash dividend of $$4\mathrm{.}00$ per share in year $4$ and $$5\mathrm{.}00$ per share in year $5.$ Thereafter, its dividend payments will grow at an annual growth rate of $6$ percent, forever. The required rate of return on the XYZ$\text{'}$s stock is $14$ percent. What should the firm's current share price be$?$