Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi, I need to solve this in excel but I am unsure how to proceed. If you could use values instead of cell references it

Hi, I need to solve this in excel but I am unsure how to proceed. If you could use values instead of cell references it would be much appreciated so I can learn the process and explanation.

Question 2:
A company is expected to pay the dividend below next year. The expected plow-back ratio and the ROE of the company for the next 5 years are also provided, from which you can calculate the expected short-term growth rate of the company. The long-term growth rate (after the initial 5 years) and the required rate of return by the investors is provided as well.
Dividend per share next year (D1) 2,41
Plow-Back Ratio (first 5 years) 0,56
ROE (first 5 years) 20%
Long-term growth rate 8,30%
Required rate of return 15,00%
(a) Calculate the share price of the company using the dividend discount model.
(b) Create a sensitivity analysis table, showing the sensitivity of the share price to changes in (i) long-term growth rate and (ii) required rate of return, for the following ranges:
Long-term growth rate +/- 2% of the number given above
Required rate of return +/- 3% of the number given above
(c) Create a tornado chart, presenting your results on the impact of changes in assumptions on the share price in part (b)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting An Introduction To Concepts Methods And Uses

Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil, Sidney Davidson

7th Edition

0030259630, 978-0030259630

More Books

Students also viewed these Accounting questions

Question

7.9 Determine how the final hiring decision is made.

Answered: 1 week ago