Johnson Signs Inc has been able to increase dividends at the rate of 2% per year since the company first started paying dividends in 1957
Johnson has developed a new production technique and can sell their signs at a premium price for the next three years. This immediate revenue boost will allow Johnson to increase dividends at a rate of 12% per year next year, then 10% the following year, and 8% the next year. After that, they intend to revert to their previous slow but steady increase in annual dividends. If current dividends are $2.45 per share and Johnson investors require an annual rate of return of 11%, WHAT IS THE CURRENT PRICE PER SHARE FOR THE COMPANY'S STOCK?
D0 = $2.45
D1 = $2.74, PV D1 = $2.47
D2 = $3.02 PV D2 = $2.45
D3 = $3.26 PV D3 = $2.38
D4 = $3.33
P3 = $36.95 PV P3 = $27.01
Current Price = $34.32
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