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Can I get solutions of it with as much as detailed explanation? So confusing with this stock valuation part. Thanks 1. A payment plan offers

image text in transcribedCan I get solutions of it with as much as detailed explanation? So confusing with this stock valuation part. Thanks

1. A payment plan offers to pay you 5 annual payments of $1000, with the first payment starting a year from now. If your required rate of return is 12%, how much should you be willing to pay for this plan a. If the payments grow at 5%, and the first payment (at t-1) is $1000, what is the value of this plan b. If the payment plan paid $1000 today (before you joined the plan), and knowing that the annual payments will grow at 5%, how does the value change? c. If the first payment in the series of 5 payments is made 3 years from now, and they paid $1000 today (before you joined the plan), what is the PRESENT value (at t-0) of this plan? 2. A stock pays a dividend of $4, if the rate is 10%, what is the value of this stock? a. If the dividend grows at 3%, how does the value of the stock change? b. f the dividend paid today was $4(before you bought the stock), and the growth rate is the same, what is the value of the stock? c. There is a 5-year break in dividend payment (doesn't usually happen in the real world), and the first dividend will be paid in 5 years (at t 5). If the company promises to pay today's dividend compounded at the growth rate for five years as their first dividend (D5 at t+5) and the growth continues at the same rate. What is the value of the stock TODAY? 3. A company just paid a dividend of $2. And the dividends are expected to grow at 6% for the next 5 years and after that at a long-term growth of 2%. The rate of return is 10% a. Find the PV of the first five payments. Keep in mind that the $2 payment was made today (at tJ0), while the first payment will be made a year from now. (Identify what kind of Multiple payments we have here, which formula to use, and what are the appropriate inputs for this formula b. Find the Present value for the payments starting at the 6th year (at t 6). The growth rate for the first 5 years is 6%, after that it is 2%. You would need to calculate the dividend payment at t-6 as an input to your perpetuity formula. remember that the formula gives you the value of the multiple payments one year before the first payment i.e. when the first payment is made at t 1, we get the value at tJ0, if it is made at t 3, we will get the value of the payments at t 2) c. Given your answers to (b) and (c) how much should you be willing to pay for the stock

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