Final answer:
The value of Leslie Inc.'s stock today, calculated using the dividend discount model with phased growth rates, results in a value of $31.4411. However, this value does not match any of the given options, which suggests a possible error in either the calculations or the provided answer choices.
Step-by-step explanation:
To calculate the value of Leslie Inc.’s stock today, given its earnings and dividends growth rates and required rate of return, we would use the dividend discount model (DDM), factoring in the growth rates for various periods.
The last dividend paid was $1.15, and it is expected to grow at an 18% rate for the next 2 years, so:
The dividend growth rate then declines to 15% in the third year;
Dividend at end of Year 3 = $1.60126 * (1 + 0.15) = $1.84145
After the third year, the growth rate stabilizes to a constant 6%.
Now to calculate the present value of these dividends:
The stock value today is the sum of these present values:
Stock Value = $1.2225 + $1.29703 + $28.9216 = $31.4411
The closest answer to our calculation is however not listed in the options provided. This could indicate a need to recheck the calculations or the possibility of a discrepancy in the question or answer options.