ZippleCrunch Corp. will pay a dividend of $2.34 per share at the end of next year (end of year 1) and this dividend is expected to grow at a -3 percent annual rate for two years from that point in time, then at a +1.5 percent rate forever. What value would you place on this stock if the WACC is 8.5% and the cost of equity is 9.1%? Please show your work.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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ZippleCrunch Corp. will pay a dividend of $2.34 per share at the end of next year (end of year 1) and this dividend is expected to grow at a -3 percent annual rate for two years from that point in time, then at a +1.5 percent rate forever. What value would you place on this stock if the WACC is 8.5% and the cost of equity is 9.1%? Please show your work.

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Wouldn't this be a multi-growth Dividend approach? Why was the dividend for Year 2, and 3 calculated using the -3% as it said it will be the rate for the next 2 years. Also, why wasn't the WACC used in the calculation? Is this just irrelevant info added to throw off the reader? Also, shouldn't we be added up the values of the first stage dividend growth and the perpetual dividend growth? 

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