(Solution) - Greenfield Environmental is expanding rapidly and it currently needs to -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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Greenfield Environmental is expanding rapidly, and it currently needs to retain all of its earnings; hence it does not pay any dividends. However, investors expect Greenfield to begin paying dividends, with the first dividend of $0.40 coming 3 years from today. The dividend should grow rapidly-at a rate of 30% per year-during Years 4 and 5. After Year 5, the company should grow at a constant rate of 6% per year. If the required return on the stock is 10%, what is the value of the stock today?