Suppose that the firm recently paid a dividend Do = $5.35. It expects to have nonconstant growth of gs = 10% for 2 years and then a constant rate of In = 3% thereafter. The firm's required return is rs = 9%. According to the problem walk-through video, what is the formula for the terminal, or continuing value, at the end of year 2? O P2 = D2 rs-9 O P2= D (1+r)? O P2 = D3 T-9 O P2= D3 (1+rs)3 According to the problem walk-through video, what is the formula for the firm's intrinsic value today? OP= D (1+r)" D2 + + (1+r)? P2 (1+r) O Po= D (1+rs)' D2 + (1+r)? + D (1+r) 3 + P (1+r) O PO D (1+rs) + D2 (1+rs)? + P2 O Po P2 (1+r)? Dividend Value D1 $5.8850 D2 $6.4735 D3 The firm's horizon value is $111.13 The firm's intrinsic value is $104.39 Step 3: Practice: Nonconstant Growth Valuation Now it's time for you to practice what you've learned. Suppose that the firm recently paid a dividend $5.35. It expects to have nonconstant growth of 10% for 3 years and then a constant rate of 3% thereafter. The firm's required return is 9%. The firm's horizon, or continuing, value is $122.24 and its intrinsic value today is $105.24