1. You are an analyst studying Beranek Technologies, which was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.50 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Your forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of Beranek's current intrinsic value?

Zero current div, non-constant then constant growth

Required return 11%

Year Growth rate Dividend O $0.00 1 $0.00 2 $0.00 3 $0.50 4 50.00% $0.75 25.00% $0.94 6 8.00% $1.01 8.00% $1.09