Vornado is a company that has patent rights for a new mobile phone technology that is expected to enable it to generate growth in earnings of 20% for the next 3 years. After that (from the start of year 4) the company expects to see earnings growth drop to a constant rate of 5%.
Assuming that the company pays out 60% of earnings as dividends and that the last dividend payment made by the company was $2.20, calculate an estimate of the current price of Vornado. Assume the required return on equity is 8%.
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