Question: Johnson Ltd. has developed new technology that has given if a competitive advantage over its competitors. This, it expects will increase its profitability until

Johnson Ltd. has developed new technology that has given if a competitive

Johnson Ltd. has developed new technology that has given if a competitive advantage over its competitors. This, it expects will increase its profitability until its-rivals can develop their own technological answers. The firm thinks that its advantage will last for three years, and estimates that its growth in profits and dividends will be 12% for the first year, 11% for the second and 9% the third year, before decreasing to a constant 5% starting in the fourth year. Cost of capital is expected to be 15%, and its last dividend was $1.65. (1) What is the stock's terminal value? (ii) What is the current share price (Po)? (iii) What is the expected share price for the year (P)? (5 marks) (8 marks) (6 marks)

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