Question
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
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. (THE ANSWER IS NOT $16.44)
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.
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Auditors Guide To Information Systems Auditing
Authors: Richard E. Cascarino
1st Edition
0470009896, 978-0470009895
