Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1 coming 3 years from today. The dividend should grow rapidly at a rate of 40% per year during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 10%, what is the value of the stock today

The value of the stock today is $28.48

Explanation:

To calculate the value of the stock today, we will use the Dividend discount model which bases the value of a stock based on the present value of the expected future dividends from the stock. The value of the stock today using this model should be,

P0 = 1 / (1+0.1)^3  +  1 * (1+0.4) / (1+0.1)^4  +  1 * (1+0.4)^2 / (1+0.1)^5  +  

[ (1 * (1+0.4)^2 * (1+0.05)  /  (0.10 - 0.05))  /  (1+0.1)^5 ]

P0 = $28.48

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.

answerplace value;