# Current value of the stock

Stephens Development Company paid a dividend of$1.12 over the last 12 months. the dividend is expected to grow at a rate of 20% over the next 3 years(supernormal growth). It will then grow at a normal constant rate of 7% for the forseeable future. The required rate of return is 12% (this will also serve as the discount rate). compute the current value of the stock?

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The current value of stock is the present value of all dividends starting from year 1 onwards. The dividends grow at 20% per year for 3 years and then at ...

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The solution explains how to determine the current value of the stock

$2.19