You are a financial adviser at Studymate Ltd

Finance Aug 12, 2020

You are a financial adviser at Studymate Ltd. Studymate is experiencing growth. Over the next 4 years, it is expected to grow fast at a rate of 35% but it will not pay any dividend. It will then convert to a 6% constant-growth rate. Investors expect the first dividend of $4.25 to be paid in year 5. investors require 20% rate of return.

What is the current price of the stock?

Expert Solution

Current price of stock = $14.64

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