6. Problem 9.14 Click here to read the Book: Valuing Nonconstant Growth Stocks Problem Walk-Through NONCONSTANT GROWTH Computech Corporation is expanding repidly and currently needs to retain all of its earnings: herce, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly-at a rate of 254 per year-during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 15%, what is the value of the stock taday? Round your answer to the nearest cent. De nat round your intermediate calculations. $ 7. Problem 9.17 Cirker te ah w Growth Storks CONSTANT GROWTH Your broker og to sell your say of Bahnsen & Co. common stock trist paid a dividend $3.50 Yesterday. Brex's clvicend Is cocted to grow 45 per year for the next 3 years. If you buy the stocs you plan to holdt for 3 years and then all the appropriate dscount rate is 10% 2. Find t explived for each of the wxl 3 years that skulle D.D, and D. Note that , - $3.SC. Round your mother DL- D- D. Given that the first cvicend payment wil ocaur 1 year from now, rc the present value of the dMdex stream; that is calcuate the pus of D. Dy and then sum thye. Found your answer to the nearest cent. De nat round your Intermediate calculators $ You expect the price of the stock yess from now to be $59.24; that you expect to equal $60.24. Discounter at 10%, rate, what is the best value of this expecte future stock price? In other words, calculate the of $60.24. Round your answer to the nierest cert. Du nut round your intermediate calculations $ you plan to buy the stock, holdt for 3 years, and then selt for sce.24, what is the most you should pay for it today? Round your answer to the nearest cent Do nct round your intermediate csiculations. 2. Lecquation below to calcuate the present value of this stack D R=D11 Assume tha: 9 - 4* and that it is constant. Do not round Intermediate celou lados. Round your erswer to the necrest cest. E the value of the stock cependent upon how icng you plan to hold it? In other words, it your planned hodiny petod ws: 2 years or 5 years rather than 3 years, would this affect the value of the stock teday, Por L. Yx. The value of the stock is dependent can be holding cried. The value calculated in partea through as the auctor a 3-car holding period. It is not equal to the value calculated in pat c. Any other hoding pe 100 would produce a dire valuca 1. YX. The value of the stock la dependent upon telling cried due to the fact that the values dixerined the prisont value of all future expected dividendi UL. NO. It wall of the stock pent upon holding er uristgut rutrum constant for hefur futuru. IV. Ye. The value of the stock is dependent upon holding period as long ate truth rate remains Carlant for the forestale uture. 7. No. The value of the stocks na dependent upon the holding seriod. The value calculated in partea thround the vauctor a 3-car holding porta. De la cous to the vau calculated in artc. Any other holding xriod would produce the same value or -Select- 6. Problem 9.14 Click here to read the eBook: Valuing Nonconstant Growth Stocks Problem Walk-Through NONCONSTANT GROWTH Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly-at a rate of 25% per year-during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 15%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations. $
