Need math help: what is the stock price?​

label Mathematics
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CRM, Inc. went public one year ago. The company is still in the growth stage, and is expecting supernormal growth of 40% for the next two years before achieving a long-run growth rate of 6%. The stock just paid a dividend of $5.00. If investors’ required rate of return is 10%, what is the stock price?

Nov 18th, 2015

Thank you for the opportunity to help you with your question!

Price = 5*1.40 / (1.10)^1 + 5*(1.40)^2 / (1.10)^2 + [5*(1.40)^2 * (1.06) / (0.10-0.06)] / (1.10)^2 =229.09

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Nov 18th, 2015

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