Nonconstant Growth Valuation

A company currently pays a dividend of $1.25 per share (D₀ = $1.25). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, then at a constant rate of 5% thereafter. The company's stock has a beta of 1.7, the risk-free rate is 5%, and the market risk premium is 5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

1. $

Horizon Value of Free Cash Flows

Current and projected free cash flows for Radell Global Operations are shown below.

	Actual 2016	2017	Projected 2018	2019
Free cash flow	$606.64	$667.32	$707.37	$756.89
(millions of dollars)

Growth is expected to be constant after 2018, and the weighted average cost of capital is 11.3%. What is the horizon (continuing) value at 2019 if growth from 2018 remains constant? Round your answer to the nearest dollar. Round intermediate calculations to two decimal places.

Constant Growth Rate, g

A stock is trading at $90 per share. The stock is expected to have a year-end dividend of $3 per share (D₁ = $3), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g? Round the answer to three decimal places.

1. %