Suppose that the firm recently paid a dividend D0=$3.25. It expects to have nonconstant growth of gt=9% for 2 vears and then a constant rate of gn=4% thereafter. The firm's required return is rz=8%. According to the problem walk-through video, what is the formula for the terminal, or continuing value, at the end of year 2 ? P2=(1+r2)3D2P2=r05D3P2=r23D2P2=(1+r2)2D3 According to the problem walk-through video, what is the formula for the firm's intrinsic value today? P0=(1+r2)2D1+(1+r2)2D1+P2P0=(1+r2)2D1+(1+r2)2D3+(1+r2)3D2+(1+r2)3B2P0=(1+r2)2D1+(1+r2)3D1+(1+r2)2BP0=(1+r2)2B1 The firmis horizon value is Consider the following scenario: The last dividend the company paid was D0=$1. The rate of growth in both earnings and dividends during the 3-year nonconstant growth period is gn=9%, the normal growth rate after the nonconstant period, i.e., starting at the end of year three and in the future is gn=4%, and the required (minimum acceptable) rate of return on the stock is rs=8%. What is the formula for the stock's intrinsic value in this case? P0=(1+r2)2D1+(1+r2)2D1+(1+rn)4D2+(1+rn)4D2+(1+r2)4BP0=(1+r2)2D1+(1+r2)2D3+(1+r2)2D2+(1+r2)2P2P0=(1+r2)2D2+(1+r2)2D1+(1+r2)2D2+(1+r2)2D2+(1+r2)2P2P0=(1+r2)2D1+(1+r2)3D2+(1+r2)2D3+(1+r2)3B3 The firm's horizon value is The firm's intrinsic value is Step 3: Practice: Nonconstont Growth Valuation Now it's time for you to practice what you've learned. Suppose that the firm recently paid a dividend $3.25. It expects to have nonconstant growth of 9% for 3 years and then a constant rate of 4% thereafter. The firm's required retum is 8%. The firm's horizon, or continuing, value is and its intrinsic value today is