You are an analyst studying Beranek Technologies, which
Question and Solution
You are an analyst studying Beranek Technologies, which was founded 10 years ago. It has been profitable for the last 5
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You are an analyst studying Beranek Technologies, which was founded 10 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 has indicated that it plans to pay a $0.50 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years with 50% dividend growth in year 4 and 25% dividend growth in year 5, and then to increase its dividend at a constant growth rate of 6.00% per year thereafter. Assuming a required return of 15.00%, what is your estimate of the intrinsic value of Beranek's stock?
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