The Matador Restoration Co. is facing continually decreasing revenues due to the evershrin
The Matador Restoration Co. is facing continually decreasing revenues due to the evershrinking population of people who want to restore vintage AMC Matadors. Based on the most recent earnings forecasts, management anticipates that dividends will decline at a rate of 20% for three years. Thereafter, Div4 will equal Div3, Div5 will equal Div4, and so on forever. The firm just paid a dividend of $2.50 and the required return on the stock is 16%. a. At what price should the stock sell for today? b. Calculate what the stock should sell for 5 years from now.