Nonconstant Dividend Growth Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly at a rate of 80% per year during Years 4 and 5. After Year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock is 14%, what is the value of the stock today? (Assume the market is in equilibrium with the required return equal to the expected return.) Do not round intermediate calculations. Round your answer to the nearest cent $

Nonconstant Dividend Growth Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly at a rate of 80% per year during Years 4 and 5. After Year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock is 14%, what is the value of the stock today? (Assume the market is in equilibrium with the required return equal to the expected return.) Do not round intermediate calculations. Round your answer to the nearest cent $

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 21P

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