Cullumber Infotech is a fast-growing communications company. The company did not pay a dividend last year and is not expected to do so for the next two years. Last year the company’s growth accelerated, and management expects to grow the business at a rate of 40 percent for the next five years before growth slows to a more stable rate of 8 percent. In the third year, management has
Dividend Growth Model is a method used for finding the value of the stock price of a company. This method assumes that all the future dividend payments are worth for the value of the stock. It is the net present value of the dividends paid on the future.
The value of the stock can be calculated as follows:
Where,
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