Average Growth Rate is: 14.3367%

Required Rate of Return is : 8.7%

10. A: Two-stage Non-constant DDM: Now lets assume that for the next four years MSFT will grow its dividends at the growth rate you estimated in (10) above. Assuming D₁ = $1.84, what are the dividends for: D₂ ; D₃ ; D₄ ; and D₅ if they grow at the rate estimated in (10) above? You may round each dividend estimate to the nearest penny. (10 points)

10 B:Now, lets assume that the dividend growth reverts back to a L-T sustainable growth rate = 6% after Year 5, that is from Year 6 to infinity. Estimate is D₆ and P₅.

(5 points)

10 C:Use the Non-constant growth DDM from the Stock Video Lecture (at 17:20) to estimate the current value of MSFT using the dividend information you found in (11) & (12) above; assume a L-T sustainable growth rate of g = 6% after Year 5; and the required rate of return found in (8). [HINT: You already have all the data, not much work left here.find the sum of the PV of the cash flows.]

(10 points)