Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings;...

   

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Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 37% per year - during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Microtech is 14%, what is the value of the stock today? Round your answer to the nearest cent. 69 Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 37% per year - during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Microtech is 14%, what is the value of the stock today? Round your answer to the nearest cent. 69

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To calculate the present value of the stock today we need to find the present value of all the futur... View the full answer