Firm is expected to grow at a constant rate of 6% and its dividend yield is 7%. Recent R&D work leads us to expect that its earnings and dividends will grow at a rate of 50% [D1 = Do(1+g) = Do(1.50)] this year and 25% the following year after which growth should match the 6% industry average rate. The last dividend paid (Do) was $1.
What is the value per share of the firm's stock?
Please break down the solution
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