Question: Your company has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of

Your company has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 35% in the coming year, 25% in the second year, and settle down to 6% starting in the 3rd year. The last dividend paid (DO) of your company was $1.5 and investors require a 20% return. a) What is the current value per share of your company's stock? b) What are the expected dividend yields in year 2 and year 10 respectively? (hint: expected dividend yield of year t Dividend t / Price.) t-1
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