# An analyst uses a two-stage variable growth model to estimate the value of Old Maid Company's common stock.The most recent annual dividend paid by the company was \$3 per share. The analyst expects dividends to increase8% per year for the next 3 years and then drop to 4% starting in year 4 and remain stable for the foreseable future.The required rate of return used for the analysis is 10%a) What are the expected dividends for the next 4 years?b) What is the value of the stock attributable to the first 3 years of dividends? (use NPV function)c) What is the value of the stock at the end of year 3? (use constant-growth model)d) What is the value of the stock attributable to years 4 and beyond? (use pv function, where answer to part C is the fv)e) What is the total value of the stock?Question 5ayear 1year 2year 3year 4Question 5b Question 5c Question 5d Question 5e

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Please show how to do this in Excel.  Thank you. help_outlineImage TranscriptioncloseAn analyst uses a two-stage variable growth model to estimate the value of Old Maid Company's common stock. The most recent annual dividend paid by the company was \$3 per share. The analyst expects dividends to increase 8% per year for the next 3 years and then drop to 4% starting in year 4 and remain stable for the foreseable future. The required rate of return used for the analysis is 10% a) What are the expected dividends for the next 4 years? b) What is the value of the stock attributable to the first 3 years of dividends? (use NPV function) c) What is the value of the stock at the end of year 3? (use constant-growth model) d) What is the value of the stock attributable to years 4 and beyond? (use pv function, where answer to part C is the fv) e) What is the total value of the stock? Question 5a year 1 year 2 year 3 year 4 Question 5b Question 5c Question 5d Question 5e fullscreen
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“Hi, as per our policy we will answer the first question. Kindly repost the remaining questions separately in order to be answered”

Step 2

a)

Computation of expected dividends for the next 4 years:

Excel sp... help_outlineImage TranscriptioncloseD 1 Year Dividends Factor @ 10% Present value \$3.00 1.0000 \$3.00 2 0 \$3.24 0.9091 \$2.95 2 \$3.50 0.8264 \$2.89 4 3 \$3.78 0.7513 \$2.84 4 \$3.93 0.6830 \$2.68 6. fullscreen

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