Question $3[12$ Marks$]$

You are managing a successful manufacturing company focusing on agricultural products. The

company did not pay a dividend last year and is not expected to do so for the next two years.

Last year the company$$s growth accelerated, and management expects to grow the business

at a rate of $30$ percent for the next five years before growth slows to a more stable rate of $7$

percent. In the third year, management has forecasted a dividend payment of R$1\mathrm{.}20.$ Dividends

will grow with the company thereafter.

The required rate of return for such stocks is $11$ percent.

Required:

$3\mathrm{.}1.$ Calculate the value of the company$$s stock at the end of its rapid growth period $($i$.$e$.,$ at

the end of five years$).(7)$

$3\mathrm{.}2.$ What is the current value of this share? $(5$