Better mousetraps has come out with an improved product. As a result the firm projects growth of….
Better mousetraps has come out with an improved product. As a result the firm projects growth of 20% per year for 4 years. By then the other firms will have the copy cat technology and competition will drive down margins. The sustainable growth rate will fall to 5%. The most recent dividend D0 was 1$ per share.
a. What are the expected values of D1, D2, D3, D4?
b. What will be stock price 4 years from now? The discount rate is 10%.
c. What is the stock price today?
d. What is the current dividend yield?
e. What will the stock price be next year? What will be the return to an investor who buys the stock and sells it in a year?
Better mousetraps has come out with an improved product. As a result the firm projects growth of…
