Agarwal Technologies was founded 1o years ago. It has been profitable for the la

Question

Agarwal Technologies was founded 1o years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management bas indicated that it plans to pay a $o.25 dividend 3 years from today, then 0 in resise il al re alive ra M rale for 2 years, an en 101nens se it al4 las unt na e a o0% lheres ner. Managsanen orecust a e fu ure d ni slitsin ulang wi i e areeaste grew th na es, is shown be ow. ssuiningu ree unrest return a 1 L00%, what your estimate of the sto ck's current valuel? Growth rate NA NA NA NA 30.00% 15.00% 8.00% $0.000 0.00$0$250 $0.325 0.374 0.404 $0.404 O b. 410.75 &$10.50

Explanation / Answer

Hence option a is correct

Year Div Terminal Value 0 $           -   $                           -   $                               -   1 $           -   $                           -   $                               -   2 $           -   $                           -   $                               -   3 $       0.25 $                      0.25 $                          0.18 4 $       0.33 $                      0.33 $                          0.21 5 $       0.37 13.47 $                    13.84 $                          8.21 6 $       0.40 Total $                          8.61

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