Nonconstant Growth and Corporate Valuation Last dividend, D. Required rate of return, rs Supernormal growth rate, gs Normal growth rate, gn Period of supernormal growth $1.20 10% 20% 7% 2 years a. Finding TTC's stock worth today, its expected dividend, and capital gains yields Year Dividend Formulas 1 2 #N/A #N/A Horizon value at the end of year 2 Stock price Dividend yield during year 1 Capital gains yield during year 1 #N/A #N/A #N/A #N/A b. Finding the price, dividend yield, and capital gains yield Period of supernormal growth 5 years Year Dividend 1 2 #N/A #N/A 3 4 #N/A #N/A #N/A 5 Horizon value at the end of year 5 Stock price Dividend yield during year 1 Capital gains yield during year 1 #N/A #N/A #N/A #N/A c. Finding TTC's dividend and capital gains yields once its period of supernormal growth ends Dividend yield #N/A Capital gains yield #N/A Sheet1 7 d. Finding the stock value based on the corporate valuation model approach 8 Year FCF (in millions) 9 1 $5.4 0 2. $12.6 1 3 $20.7 2 4 $40.2 3 5 $68.6 4 6 $94.0 5 7 $103.0 5 8 $128.9 9 $149.2 10 $161.0 0 9 WACC Growth rate after the 10th year, an Number of common stock outstanding Number of preferred stock Value of nonoperating assets Market value of debt 9% 7% 25 millions 0 millions $0 millions $1,400 millions HV of FCF at the end of year 10 millions #N/A 1-10 at year o PV of FCF PV of HV at year o Market value of operations Market value of nonoperating assets Total corporate value Less: market value of debt Intrinsic value of common equity millions millions millions millions millions millions millions #N/A #N/A #N/A #N/A #N/A #N/A #N/A Intrinsic value per share #N/A