Question
eBook Problem Walk-Through Holt Enterprises recently paid a dividend, D 0 , of $1.25. It expects to have nonconstant growth of 22% for 2 years
eBook Problem Walk-Through Holt Enterprises recently paid a dividend, D0, of $1.25. It expects to have nonconstant growth of 22% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 15%. a. How far away is the horizon date?
b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. $_______ c. What is the firm's intrinsic value today, ? Do not round intermediate calculations. Round your answer to the nearest cent. $ _______ |
d. You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25) and has a beta of 0.9. The risk-free rate is 5.5%, and the market risk premium is 6%. Justus currently sells for $36.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P ^3 ?) Do not round intermediate calculations. Round your answer to the nearest cent.
$ ________
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