Colgate-Palmolive Company has just paid an annual dividend of $1.06. Analysts ar
ID: 2743037 • Letter: C
Question
Colgate-Palmolive Company has just paid an annual dividend of $1.06. Analysts are predicting a 10.3% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.1 per year. If Colgate's equity cost of capital is 77.5% per year and its dividend payout ratio remains constant, what price does the dividend-discount model predict Colgate stock should sell for?
If possible can the xls/excel be posted of the formulas that way I can actually learn this, thanks.
Explanation / Answer
Particulars Calculation Amount Disc Factor Present Value D1 1.06*(1 + 10.3%)^1 1.17 0.5634 0.66 D2 1.06*(1 + 10.3%)^2 1.29 0.3174 0.41 D3 1.06*(1 + 10.3%)^3 1.42 0.1788 0.25 D4 1.06*(1 + 10.3%)^4 1.57 0.1007 0.16 D5 1.06*(1 + 10.3%)^5 1.73 0.0568 0.10 T5 1.06*(1 + 10.3%)^5*(1+5.1%) / ( 77.5% - 5.1%) 2.51 0.0568 0.14 Stock Value 1.72