Question
Calculate the stock value. A fast growing firm recently paid a dividend of $0.95 per share. The dividend is expected to increase at a 15
Calculate the stock value.
A fast growing firm recently paid a dividend of $0.95 per share. The dividend is expected to increase at a 15 percent rate for the next three years. Afterwards, a more stable 10 percent growth rate can be assumed.
If an 11 percent discount rate is appropriate for this stock, what is its value today? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Latest dividend $ 0.95
Non constant growth rate 15.00%
Length of time non constant growth rate lasts for (in years) 3
Eventual constant growth rate 10.00%
Discount rate 11.00%
Complete the following analysis. Do not hard code values in your calculations. Assume that the period of non constant growth will last no more than 5 years.
Time period Dividend
1
2
3
4
5
Value at time 5
Value today
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started