Mountain Corporation just paid a dividend of $2.20 per share. The dividends are expected to grow at 24 percent for the next eight years and then level off to a growth rate of 3.5 percent indefinitely. If the required return is 12 percent, what is the price of the stock today?

Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

To calculate the price of the stock today, we can use a two-stage dividend discount model (DDM). The first stage involves calculating the present value of dividends during the high-growth phase, and the second stage involves calculating the present value of the stock price after the high-growth phase (based on the constant growth rate thereafter).

### Given Data:
- Dividend just paid: $ D_0 = 2.20 $
- High growth rate: $ g_1 = 24\% = 0.24 $
- Constant growth rate after eight years: $ g_2 = 3.5\% = 0.035 $
- Required return: $ r = 12\% = 0.12 $
- High-growth period: 8 years

### Step 1: Calculate dividends for the first 8 years
Using the dividend growth formula for the first 8 years:

\[
D_t = D_0 \times (1 + g_1)^t
\]

For each year from 1 to 8, we'll compute the dividend using this formula.

### Step 2: Calculate the terminal price (after year 8)
After 8 years, the dividends will grow at a constant rate of $ g_2 = 3.5\% $. The price at the end of year 8 (denoted as $ P_8 $) is given by the Gordon Growth Model:

\[
P_8 = \frac{D_9}{r - g_2}
\]

Where:
\[
D_9 = D_8 \times (1 + g_2)
\]

### Step 3: Calculate the present value of the dividends and the terminal price
To find the present value of these dividends and the terminal price today (year 0), we will discount them using the required return $ r = 12\% $:

\[
PV = \sum_{t=1}^{8} \frac{D_t}{(1 + r)^t} + \frac{P

Mountain Corporation just paid a dividend of $2.20 per share. The dividends are expected to grow at 24 percent for the next eight years and then level off to a growth rate of 3.5 percent indefinitely. If the required return is 12 percent, what is the price of the stock today?

Discover how to calculate the price of Mountain Corporation's stock today using the two-stage dividend discount model (DDM). The company paid a dividend of $2.20, with dividends growing at 24% for 8 years and then leveling to 3.5%. The required return is 12%. Learn step-by-step calculations, including the dividend growth formula and present value of future cash flows.

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