Problem 2 A late penalty of 36% will apply to new answers. Intro A stock just paid an annual dividend of $1.2. The dividend is expected to grow by 10% per year for the next 3 years. The growth rate of dividends will then fall steadily (linearly) from 10% after 3 years to 7% in year 6. The required rate of return is 12%. Attempt 4/10 for 8.6 pts. Part 1 What is the intrinsic value of the stock if the dividend growth rate will stay 0.07 (7%) forever after 6 years? 33.24 Correct A C D E F G H I 0 1 0.1 1.2 1.32 1.452 1.597 1.741 1.88 2.012 G3*(1+H2) 0.12 43.05 H3*(1+H2)/(B4-H2) 1.179 1.158 1.137 1.106 1.067 22.83 =(H3+H5) /(1+$B4)^H1 28.48 =SUM(C6:H6) 1 Year 2 Growth rate 3 Dividend 4 Req. return 5 P6 6 PV 7 Vo B 2 3 4 5 6 0.1 0.1 0.09 0.08 0.07 Attempt 9/10 for 2.4 pts. Part 2 In 6 years, the P/E ratio is expected to be 14 and the payout ratio to be 80%. What is the intrinsic value of the stock when using the P/E ratio? 1+ decimals Submit