Dividend Valuation Model

You really must watch my free lectures on the valuation of shares! The market value depends on the expectation of all futures dividends. There no growth for the first three years, and so you need to discount them as normal. There is growth afterwards and for the growing dividends you need to use the dividend valuation formula. You are simply assuming that the dividend remains constant for ever!! In my lectures I explain this and work through examples (including examples similar to the one you have written, which is commonly asked in the exam).