Smith Bottling Company is a start-up company. No dividends will be paid to ordinary shareholders over the

Fantastic news! We've Found the answer you've been seeking!

Question:

Smith Bottling Company is a start-up company. No dividends will be paid to ordinary shareholders over the next five years as profits need to be retained to finance the company’s expansion. The company will then, in year 6, begin to pay a dividend of R6,65 per share. Analysts expect that the company’s dividends will increase by 10% per year thereafter.

If the required return on this share is 20%, what is the current value of the share?