Non-Constant Growth: Starskeep Ltd Is a Fast Growing Technology Company

question 76

Multiple Choice

Non-constant growth: Starskeep Ltd is a fast growing technology company. The company projects a rapid growth of 40 percent for the next two years and then a growth rate of 20 percent for the following two years. After that, the company expects a constant-growth rate of 8 percent. The company expects to pay its first dividend of $1.25 a year from now. If your required rate of return on such shares is 20 percent, what is the current price of the share?

• A) $15.63
• B) $4.70
• C) $30.30
• D) $22.68

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Definitions:

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