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Jagdambay Exports is expecting a period of intense growth and has decided to retain more of their earnings to help finance that growth. As a result,

Jagdambay Exports is expecting a period of intense growth and has decided to retain more of their earnings to help finance that growth. As a result, they are going to reduce the annual dividend by 20% a year for the next three years. After that they will maintain a constant dividend of $1 a share. Last year, the company paid $2.25 as the annual dividend per share. What is the market value of this stock if the required rate of return is 16%? Please show all the calculations by which you came up with the final answer. 

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3 comments
  • I have assumed that dividend are paid year end, that is why we discounted year 1 dividend onward to derive present value
    • payaljain3
    • Jun 05, 2018 at 3:15pm
  • Thank you, can you answer another 2 for me.
    • msi749
    • Jun 05, 2018 at 3:33pm
  • sure, I will be glad to assist. Kindly post it as separate questions
    • payaljain3
    • Jun 05, 2018 at 3:41pm

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