Bruin Inc. has recently announced a $7.9 EPS. Earnings are expected to grow at 5 percent...
Bruin Inc. has recently announced a $7.9 EPS. Earnings are expected to grow at 5 percent per year forever. The company will not pay dividends on the stock over the next 6 years.
However, it will pay 30% of its earnings as dividend starting in year 7. The payout ratio will remain at 30% forever. Earnings will continue to grow at the same 5% rate.
If the required rate of return on this stock is 15 percent, what is the current share price according to the dividend growth model?
Select one:
a. 12.54
b. 14.42
c. 1.44
d. 7.21
e. 1.25
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