The Edgar Corporation currently (D0) pays a $2 per share dividend. This dividend is expected to grow at a 20 percent annual rate over the next three years and then to grow at a 6 percent per year for the foreseeable future. What would you pay for a share of this stock if you demand a 20 percent rate or return?

see Table 8.4

En primer lugar se calcula la suma de los valores presentes de los dividendos recibidos durante el periodo de crecimiento no constante (afine 1 al 5 en este racn) Fete totaliza $9 75 on ceoundo lugar utiliza el mod Table 8.4 Value of HILO Electronics Common Stock ar el and Dividend ante anac Present Value Interest Factor, Present Value. Year, t 15 al valo D, = $2.00(1 + 0.12)' PVIFo.15.t Present Value of First 5 Years' Dividends 5n. UA W N - $2.00(1 + 0.12) = $2.24 0.870 $1.95 2.00(1 + 0.12)2 = 2.51 0.756 $1.90 2.00(1 + 0.12)3 = 2.81 0.658 $1.85 2.00(1 + 0.12)1 = 3.15 0.572 $1.80 2.00(1 + 0.12)5 = 3.53 0.497 $1.75 D6 $9.25 Value of Stock at End of Year 5, Ps = ke - 82 D6 Ps = 0.15 - 0.06 D. = Ds(1 + 82) = $3.53(1 + 0.06) = $3.74 PS $3.74 0.15 - 0.06 = $41.56 Present Value of Ps. PV(PS) = PS ( 1 + k )s $41.56 (1 + 0.15)5 = $41.56(PVIFo.15.5) = $41.56(0.497) = $20.66 Value of Common Stock, Po = PV (first 5 years' dividends) + PV(P,) DE Po = $9.25 + $20.66 170 = 090 01 PDF Caso. McDonal's Exp..pdf Open file . . . Show all X