The DAP Company has decided to make a major investment. The investment will require a substantial early cash out-flow, and inflows will be relatively late. As a result, it is expected that the impact on the firm's earnings for the first 2 years will be a negative growth of 5% annually. Further, it is anticipated that the firm will then experience 2 years of zero growth after which it will begin a positive annual sustainable growth of 6%. 

If the firm's cost of capital is 10% and its current dividend (D₀) is $2 per share, what should be the current price per share?

Answer rating: 100% (QA)

D12 THERE IS NEGATIVE GROWTH 5 D121005190 PD1PRESENT VALUE OF D1190101172 D2195X095185 P... View the full answer