Assume that today is January 1, 2015 and that at t = 1 the company will pay the

Question

Assume that today is January 1, 2015 and that at t = 1 the company will pay the dividend 2.2. (That is, assume that this forecasted 2015 dividend is D1, and that this is the first cash flow you receive as an investor.) Assume that the dividend growth rate for the three years after 2015 (2016-2018, which correspond to Years 2, 3, and 4) is 15.5%. Assume that after 2018 (after Year 4), the dividend grows at a long-run constant growth rate of 5.0% a year. the required rate was 8.4%

Given these assumptions, what is your estimate of the stock

Explanation / Answer

Year 1 2 3 4 5 Dividend 2.2 2.541 2.934855 3.389758 3.559245 Terminal value=(Div(Year5)/(0.084-0.05)) 104.6837 Cash flow 2.2 2.541 2.934855 108.0734 P.V@8.4% 2.02952 2.16245 2.304087 78.27118 Intrnsic value(NPV) 84.76724

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects