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Beranek Technologies was founded 10 years ago. It has been profitable for the past 5 years, but it ...

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Beranek Technologies was founded 10 years ago. It has been profitable for the past 5 years, but it ...

Beranek Technologies was founded 10 years ago. It has been profitable for the past 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 $0.60 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 9% thereafter. The forecast of the future dividend stream, along with the forecasted growth rates, is shown below. With a required return of 12%, what is the current intrinsic value?


Year	0	1	2	3	4	5	6
Growth rate	NA	NA	NA	NA	60%	30%	9%
Dividend	$0	$0	$0	$0.60	$0.96	$1.25	$1.36

▸

$26.50

▸

$26.83

▸

$27.12

▸

$27.48

Textbook

Financial Management: Theory and Practice

Edition: 4^th

Authors: Brigham, Ehrhardt, Gessaroli, Nason

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