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a. What is the value of the stock if the current dividend is $1.30, the first stage growth is 18 percent, the second stage growth is 9 percent, and the discount rate is 11 percent? b. What is the value of the stock if the current dividend is $1.30, the first stage growth is 2 percent, the second stage growth is 8 percent, and the discount rate is 9.5 percent? c. What is the value of the stock if the current dividend is $2.50, the first stage growth is 15 percent, the second stage growth is 7 percent, and the discount rate is 10 percent?

a. What is the value of the stock if the current dividend is $1.30, the first stage growth is 18 percent, the second stage growth is 9 percent, and the discount rate is 11 percent? b. What is the value of the stock if the current dividend is $1.30, the first stage growth is 2 percent, the second stage growth is 8 percent, and the discount rate is 9.5 percent? c. What is the value of the stock if the current dividend is $2.50, the first stage growth is 15 percent, the second stage growth is 7 percent, and the discount rate is 10 percent?

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter9: Stocks And Their Valuation
Section: Chapter Questions
Problem 12P
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Assume that the first 5 years is the first stage and, years thereafter is the second stage of growth.

4 Second-stage growth = 5 Discount rate = Year 1 2 3 4 Projected dividend Terminal price = 10 Present value = a. What is the value of the stock if the current dividend is $1.30, the first stage growth is 18 percent, the second stage growth is 9 percent, and the discount rate is 11 percent? b. What is the value of the stock if the current dividend is $1.30, the first stage growth is 2 percent, the second stage growth is 8 percent, and the discount rate is 9.5 percent? c. What is the value of the stock if the current dividend is $2.50, the first stage growth is 15 percent, the second stage growth is 7 percent, and the discount rate is 10 percent? 6
Transcribed Image Text:4 Second-stage growth = 5 Discount rate = Year 1 2 3 4 Projected dividend Terminal price = 10 Present value = a. What is the value of the stock if the current dividend is $1.30, the first stage growth is 18 percent, the second stage growth is 9 percent, and the discount rate is 11 percent? b. What is the value of the stock if the current dividend is $1.30, the first stage growth is 2 percent, the second stage growth is 8 percent, and the discount rate is 9.5 percent? c. What is the value of the stock if the current dividend is $2.50, the first stage growth is 15 percent, the second stage growth is 7 percent, and the discount rate is 10 percent? 6
8-38 Spreadsheet Problem Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm over a five-year horizon. A В C D E F 1 Inputs 2 Current dividend = 3 First-stage growth : 4 Second-stage growth Discount rate = 7 Year 1 3 4 5 8. Projected dividend Terminal price =
Transcribed Image Text:8-38 Spreadsheet Problem Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm over a five-year horizon. A В C D E F 1 Inputs 2 Current dividend = 3 First-stage growth : 4 Second-stage growth Discount rate = 7 Year 1 3 4 5 8. Projected dividend Terminal price =
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