As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the

company's expected growth rate to increase or decrease, thereby affecting the results of the valuation model. For companies in such situations, you

would refer to the nonconstant growth model for the valuation of the company's stock.

Consider the case of Hungry Whale Electronics Company:

Hungry Whale Electronics Company $($HWEC$)$ just paid a dividend of $$1\mathrm{.}68$ per share. The company expects the coming year to be very profitable, and

its dividend is expected to grow by $20\mathrm{.}00\%$ over the next year. After the next year, though, Hungry Whale's dividend is expected to grow at a constant

rate of $4\mathrm{.}00\%$ per year.

Complete the following table, assuming that the market is in equilibrium, and:

The risk$-$free rate $(r_{RF})$ is $5\mathrm{.}00\%$

The market risk premium $(R{P}_M)$ is $6\mathrm{.}00\%,$ and

Hungry Whale's beta is $1\mathrm{.}50$

Note: Do not round intermediate calculations.

Value

Term

$($Dollars$)$

Dividends one year from now $(D_1)$

Horizon Value $($HV$)$

Intrinsic Value

Which of the following most closely approximates the expected dividend yield for Hungry Whale's stock today?

$10\mathrm{.}00\%$

$8\mathrm{.}00\%$

$10\mathrm{.}96\%$

$9\mathrm{.}61\%$As companies evolve, certain factors can drive sudden growth. This may lead to a bperiod of nonconstant, or variable, growth. This would cause the company$$s expected growth rate to increase or decrease, thereby affecting the results of the valuation model. For companies in such situations, you would refer to the nonconstant growth model for the valuation of the company$$s stock.

Consider the case of Hungry Whale Electronics Company:

Hungry Whale Electronics Company $($HWEC$)$ just paid a dividend of $$1\mathrm{.}68$ per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by $20\mathrm{.}00\%$ over the next year. After the next year, though, Hungry Whale$$s dividend is expected to grow at a constant rate of $4\mathrm{.}00\%$ per year.

Complete the following table, assuming that the market is in equilibrium, and:

$$ The risk$-$free rate $($rRF

$)$ is $5\mathrm{.}00\%$

$$ The market risk premium $($RPM

$)$ is $6\mathrm{.}00\%,$ and

$$ Hungry Whale$$s beta is $1\mathrm{.}50$

Note: Do not round intermediate calculations.

Term

Value

$($Dollars$)$

Dividends one year from now $($D$1$

$)$

Horizon Value $($HV$)$

Intrinsic Value

Which of the following most closely approximates the expected dividend yield for Hungry Whale$$s stock today?

$10\mathrm{.}00\%$

$8\mathrm{.}00\%$

$10\mathrm{.}96\%$

$9\mathrm{.}61\%$