Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just paid a cash dividend of $3.00 per share. The company expects to grow its dividend at 16% for the next two years, then at 14% for the following three years, after which the company expects to grow at a constant rate of 10% per year indefinitely.
The required rate of return on Roadrunner’s common stock is 16%.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You wonât have to worry about the quality and deadlinesOrder Paper Now
A. What are the dividends in years 1 through 5?
B. What is the Fair Market Value of the stock at the end of year 5?
C. What is the Fair Market Value of the stock now?
D. If the stock now trades at $80 per share, is the stock rich or cheap?