Calculation of Market Value of a Share of Stock

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Question

Al Oft, CEO of Balloons, Inc, predicts that the company will pay a steady dividend of $.42 per share in each of the next three years. After this, he expects the dividend to increase at a rate of 12% for years 4 and 5. After year 5, the dividend will grow at a perpetual rate of 3%. What is the market value of a share of stock in the company if the required rate of return is 11%?

Summary: This question belongs to finance and discusses about a company’s market value of a share of stock.

Total word count: 53

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