Question
Excel Online Structured Activity: Nonconstant growth Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay
Excel Online Structured Activity: Nonconstant growth
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 41% per year - during Years 4 and 5; but after Year 5, growth should be a constant 4% per year. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
Open spreadsheet
If the required return on Computech is 17%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.
Stock price derived from excel was $3.43
Excel template - Saved File Home Insert Formulas Data Review View Help Tell me what you want to do Comments Arial 10 5 ab General LL AutoSum HT NI 27 B I U D ab Paste Insert Delete Format .00 . Conditional Format Cell Formatting as Table Styles Sort & Find & Filter Select A $ - % AP 0 Clear Undo Clipboard Font Alignment Numbel Tables Cells Editing C18 fx B D E F G H 1 J K L $1.50 41.00% 4.00% 17.00% 0 2 0 3 $1.50 41.00% 4 $2.12 41.00% 5 $2.98 4.00% 6 $3.10 0 A 1 Nonconstant growth 2 3 Year 3 Dividend, D3 4. Supernormal growth rate, g, 5 Normal growth rate, gn 6 Required return.rs 7 8 9 Dividends 10 PS 11 Cash flows to common stockholders 12 13 PV of cash flows to common stockholders 14 Stock Price, P. 15 16 Alternatively, using Excel NPV function: 17 Stock Price, Po 18 19 20 Formulas 21 0 0 $1.50 $2.12 $2.98 $0.00 $0.00 $0.94 $1.13 $1.36 $3.43 $3.43 41.00% 41.00% 4.00% 7
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