A stock just paid an annual dividend of $0.40 per share. The firm expects to increase the dividend by 20 percent per year for th
e next four years and 3 percent per year thereafter. The discount rate is 11 percent. Which one of these is correct regarding the two-stage growth formula?
Two stage dividend growth model enables us to identify dividend value by incorporating the effect of multiple growth rates. This model assumes that dividend will pass out through 2 stages of growth. In first stage the dividend grows at a constant rate to a specified time then dividend grows at a further rate.
