Suppose that sales and profits of Oly Enterprises are growing at a rate of 30% per year. At the end of four years the growth rate will drop to a steady 4%. At the end of year 5, Oly will pay its firstdividend in the amount of $2 per share. If the required return is 16%, what is the value of a share of stock? Assume dividends grow at the same rate as earnings after year 4.

The value of stock if constant growth rate is to be considered, can be found by using DDM model…

Answered: Suppose that sales and profits of Oly…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 18MC

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