Sawchuck Consulting Has Been Profitable for the Last 5 Years,but

Sawchuck Consulting has been profitable for the last 5 years,but it has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value?

A) $9.94
B) $10.19
C) $10.45
D) $10.72
E) $10.99

Correct Answer:

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