Juan Diaz is contemplating investing in shares of Indigo Inc, whose shares are currently trading at $18.99
Question:
Juan Diaz is contemplating investing in shares of Indigo Inc, whose shares are currently trading at $18.99 per share. The company has recently started operations and is not expected to pay dividends for the next four years. The company's EPS currently stands at $2.75 and is expected to grow at a rate of 16% per year for the next four years. Starting in year 5, the company's growth rate is expected to fall to 5% and remain at that level in perpetuity. From year 5 onwards, Indigo is also expected to retain 60% of its earnings and distribute the remainder as dividends. Given a required rate of return of 12%, calculate the company's current stock .
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow