Lifecycle motorcycle company is expected to pay a dividend in year 1 of $2, a dividend in year 2 of $3, and a dividend in year 3 of $4. after year 3, dividends are expected to grow at the rate of 7% per year. an appropriate required return for the stock is 12%. using the multistage ddm, the stock should be worth today.

$67.95

Explanation:

First, find the dividend per year;

D1 = $2

D2= $3

D3= $4

D4= D3(1+g) = 4(1.07) = $4.28

Next, find the PV of each dividend given a rate of 12%

PV (D1) =2 / (1.12) = 1.7857

PV (D2) = 3/ (1.12²)= 2.3916

PV (D3) = 4/ (1.12³) = 2.8471

PV (D4 onwards) =

Price = 1.7857+ 2.3916 + 2.8471 + 60.9296

Therefore, the stock should be worth $67.95

answer; encouraging the development of innovations by firms attempting to break a monopoly; (creative destruction)