Suppose a firm has a current dividend of D(0) = $2.00 which is expected to growth 25% a year for 3 years and thereafter grow at the rate of 5 percent with a discount rate or required rate of return of 15 percent. **I NEED ASSISTANCE WITH EXCEL FORMULAS ONLY** ANSWERS ARE PROVIDED TO CHECK YOUR WORK.

Two-Stage Dividend Growth Model and H-Model Please use following information and solve the Two-Stage Dividend Discount Model and H-Model Problem Suppose a firm has a current dividend of D(O) = $2.00 which is expected to growth 25% a year for 3 years and thereafter grow at the rate of 5 percent with a discount rate or required rate of return of 15 percent $2.00 $5.00 D(0) N G1 G2 K D(0) N G1 G2 25% 5% 15% 30% 10% 20% Do(1+9.217-( 1+91 1 Two-Stage Dividend Discount Model What is the value of the stock? P(0) $ 87.57 1+91 D.(1+92) P = 0 + $ 34.07 K-9 1+k 1+k K-92 2 H-Model What is the value of the stock? Year 1 Year 2 Year 3 Year 4 Growth Rate Dividends 25.00% $ 2.50$ 18.33% 11.67% 2.96 $ 3.30$ 5.00% 3.47 30% 6.50 $ 23% 8.02 17% 9.35 10% 10.29 First Calculate P(3) $ 34.69 $ 102.88 $2.17 PV of D(1) PV of D(2) PV of D(3) PV of P(3) $ 2.17 $ 2.24 $ 2.17 $ 22.81 $ 5.42 $ 5.57 $ 5.41 $ 59.54 P(O)= $ 29.39 $ 75.93 Two-Stage Dividend Growth Model and H-Model Please use following information and solve the Two-Stage Dividend Discount Model and H-Model Problem Suppose a firm has a current dividend of D(O) = $2.00 which is expected to growth 25% a year for 3 years and thereafter grow at the rate of 5 percent with a discount rate or required rate of return of 15 percent $2.00 $5.00 D(0) N G1 G2 K D(0) N G1 G2 25% 5% 15% 30% 10% 20% Do(1+9.217-( 1+91 1 Two-Stage Dividend Discount Model What is the value of the stock? P(0) $ 87.57 1+91 D.(1+92) P = 0 + $ 34.07 K-9 1+k 1+k K-92 2 H-Model What is the value of the stock? Year 1 Year 2 Year 3 Year 4 Growth Rate Dividends 25.00% $ 2.50$ 18.33% 11.67% 2.96 $ 3.30$ 5.00% 3.47 30% 6.50 $ 23% 8.02 17% 9.35 10% 10.29 First Calculate P(3) $ 34.69 $ 102.88 $2.17 PV of D(1) PV of D(2) PV of D(3) PV of P(3) $ 2.17 $ 2.24 $ 2.17 $ 22.81 $ 5.42 $ 5.57 $ 5.41 $ 59.54 P(O)= $ 29.39 $ 75.93