Check My Work 3 remaining Click here to read the eBook Valui

Check My Work (3 remaining) Click here to read the eBook: Valuing Nonconstant Growth Stocks NONCONSTANT GROWTH Carnes Cosmetics Co.\'s stock price is $71.68, and it recently paid a $1.00 dividend. This dividend is expected to grow by 30% for the next 3 years, then grow forever at a constant rate, g; and rs-1096. At what constant rate is the stock expected to grow after Year 3? Round your answer to two decimal places. Do not round your intermediate calculations.

Solution

71.68=1*1.3/1.1+1*1.3^2/1.1^2+1*1.3^3/1.1^3+(1*1.3^3*(1+g)/(10%-g))/1.1^3

=>g=7.37242%