Samantha Feels That XYZ Corporation Is Currently a High Growth

question 73

Essay

Samantha feels that XYZ corporation is currently a high growth corporation. She expects dividend payments to rise by 30% each year for the next 2 years. After that, she expects dividends to remain constant for perpetuity. Next year, dividends will be $1.00. Samantha's appropriate discount rate is 12% for this investment option. Based on Samantha's expectations, what price is she willing to pay to receive the flow of dividends? If the stock is currently trading for $11, should she purchase the stock to capture the dividend stream?

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