Question

Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just...

Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just paid a cash dividend of $2.00 per share. The company expects to grow its dividend at 14% for the next two years, then at 12% for the following three years, after which the company expects to grow at a constant rate of 8% per year forever.

If the required rate of return on Roadrunner's common stock is 12%, then what is the Fair Market Value (FMV) of the stock now?

SHOW ALL WORK!

Please estimate to the nearest penny.

D1=

D2=

D3=

D4=

D5=

P5=

FMV or Fair Market Value now =

If the stock now trades at $40.00 per share, is it rich or cheap?

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