Micro Corp

Micro Corp. just paid dividends of $2 per share. Assume that over the next three years dividends will grow as follows, 5 percent next year, 15 percent in year two, and 25 percent in year 3. After that growth is expected to level off to a constant growth rate of 10 percent per year. The required rate of return is 15 percent. Calculate the intrinsic value using the multistage model.

A) $5.56
B) $66.4
C) $49.31
D) $43.66
E) $35.21

Correct Answer:

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