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First Innovators, Inc. (FII) is presently enjoying relatively high growth because its latest new product is years ahead...

First Innovators, Inc. (FII) is presently enjoying relatively high growth because its latest new product is years ahead of its competition. Management expects earnings and dividends to grow at a rate of 40% for the next 4 years, after which its new product’s competition will increase and reduce the growth rate in earnings and dividends to 2%, i.e., g = 2%. The company’s last dividend, D0, was $2.75. FII’s beta is 1.50, the market risk premium is 5.50%, and the risk-free rate is 3.50%. What is the intrinsic value of FII’s common stock? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

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Answer #1

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