Wichita Technologies is expected to grow at a rate of 35 percent for the next three years

Question:

Wichita Technologies is expected to grow at a rate of 35 percent for the next three years and then stabilize with annual growth of 7 percent. The company will pay no dividend for the first two years and will pay a dividend of $1.25 in year

3. What will be the value of the company’s stock when the company’s supernormal growth ends? What is the value of the stock today? Assume that dividends will grow at the same rate as the firm once Wichita starts paying them. The required rate of return is 12 percent.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...