Question: Include explanation please. A corporation is experiencing rapid growth. No dividends are being paid but they expect to pay the first dividend of $1.00 3

Include explanation please.

  1. A corporation is experiencing rapid growth. No dividends are being paid but they expect to pay the first dividend of $1.00 3 years from today. This dividend will grow rapidly; 50% per year during Years 4 and 5. After year 5, constant growth of 8% is expected. If the required return is 15%, what is the value of the stock today?
    1. Calculate the dividend cash flows like we did during the lecture.
    2. Then calculate the stock price when growth becomes constant Horizon Value.
    3. Then calculate the intrinsic value of the stock need to take PVs of dividends and Horizon Value.

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