In practice, a common way to value a share of a stock when a company pays...

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In practice, a common way to value a share of a stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock price. Suppose a company just paid a dividend of $1.15. The dividends are expected to grow at 20% over the next five years. After five years, the dividends are expected to grow at 7% per year indefinitely. Assume a required rate of return of 12%, and that the market price of the stock is $33. Do you think that this stock could be a good investment to buy or to sell? Why is that? In practice, a common way to value a share of a stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock price. Suppose a company just paid a dividend of $1.15. The dividends are expected to grow at 20% over the next five years. After five years, the dividends are expected to grow at 7% per year indefinitely. Assume a required rate of return of 12%, and that the market price of the stock is $33. Do you think that this stock could be a good investment to buy or to sell? Why is that?

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