Takuma is valuing the stock of the Paloma Company which manufactures machine tools. The firm is just about to pay a dividend of $2 per share. This is expected to grow at 15% a year for five years, 10% a year for the ten years after that before finally settling down to a growth rate of 5% per year for ever after that. The market capitalization rate of similar stocks is 8%.

What is the present value of each share?

Answer rating: 100% (QA)

To calculate the present value of each share we need to find the present value of all future cash fl... View the full answer