Question

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $14 per share dividend in 10 years and will increase the dividend by 8 percent per year thereafter. If the required return on this stock is 14 percent, what is the current share price?

Answer 1

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