6: Molly Corporation just paid a dividend of $1.25 per share. The company expects that the dividend will grow at a rate of 10% for next three years. After year three it is expected that the dividend will decline at a rate of 3% indefinitely. If the required return is 16%, what is the value of a share of stock? DO = $1.25 Time Dividend PV's Sum of PV's 1.25 N/A 8.82 8.82 1 1.38 1.19 2 1.51 1.12 3 1.66 1.07 8.49 4 1.61 *Note: P3, $6.97 is the present value of a perpetual stream of cash flows where the first cash flow occurs at time four. This is a theoretical present value located at time three. After finding P3 we discount this to time zero and add it to the present values of Dl, D2, and D3.