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Problem 7 (20 points): Suppose the current dividend is $5. Due to Covid-19 pandemic, the firm is facing a tough situation, and the dividend will
Problem 7 (20 points): Suppose the current dividend is $5. Due to Covid-19 pandemic, the firm is facing a tough situation, and the dividend will shrink at the rate of 10% per year for the following years. There will be 5 yearly dividends, and the appropriate discount rate is 4%. What is the value of the stock, based on the constant growth rate model? (show your steps; if using excel or calculator, please at least write down the formula you are using and input numbers) (hint: when the dividend will shrink, the dividend growth rate should be a negative number)
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