Question

A7X Corp. just paid a dividend of $1.55 per share. The dividends are expected to grow at 30 percent for the next 9 years and then level off to a growth rate of 8 percent indefinitely. If the required return is 13 percent, what is the price of the stock today?

I've tried a couple of times and haven't gotten the correct answer. Writing out the steps would be very appreciated so I can see where I went wrong, thanks!

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

JUST WRITTEN IN EXCEL. NO EXCEL FUNCTION IS USED.

ke - Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins E AutoSum - Cut A A Wrap Text Calibri 11 General ECopy Fill в IU* Insert Delete Format Paste A +.0 .00 .00 .0 Conditional Format Cell Sort & Find & % a Merge & Center Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fox AA819 C A U V W х Y Z AA АВ АC 801 STEP 1 802 DIVIDEND 0 DO 1.5500 803 2.0150 [1.55* (1+0.30)] 804 1 D1 805 2 D2 2.6195 AND SO ON 3 D3 806 3.4054 4 D4 807 4.4270 808 5 D5 5.7550 7.4816 809 6 D6 810 7 D7 9.7260 8 D8 811 12.6438 812 9 D9 16.4370 17.7519 [16.4370*(1+0.08)] 813 10 D10 814 815 D10/(ke-g) 17.7519/(0.13-0.08) 816 P9 D10 17.7519 817 P9 g=8% ke 13% 818 P9 355.04 819 820 821 RESI e YIELD bond portfolio UTILITY, SHARPE, beta cONvexity DGM beta LEASING PV, FV, ANNUITY DIR right clean КЕ САРМ port future INDEX INTL CAP BUD cap stru WACC Rea 120% erences: Z18 XУ WA 11:55 1ENG 04-11-2019

ke - Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins E AutoSum - Cut A A Wrap Text Calibri 11 General ECopy Fill Merge & Center Insert Delete Format Paste A +.0 .00 .00 .0 Conditional Format Cell Sort & Find & BIU % Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fox W836 C A W X Y Z AA AB AC 819 DIV P9 820 PV FACTOR AT 13% PV OF DIV P9 LIT A*B 821 A B 1.78 822 1 D1 2.0150 0.884956 0.783147 823 2 D2 2.6195 2.05 3 D3 3.4054 2.36 824 0.693050 4 D4 0.613319 2.72 825 4.4270 0.542760 826 5 D5 5.7550 3.12 7.4816 827 6 D6 0.480319 3.59 828 7 D7 9.7260 0.425061 4.13 8 D8 829 12.6438 0.376160 4.76 830 9 D9P9 371.4756 0.332885 123.66 831 832 ANSWER PO = 148.18 833 834 835 836 837 838 839 RESI e YIELD bond portfolio UTILITY, SHARPE, beta cONvexity DGM beta LEASING PV, FV, ANNUITY DIR right clean КЕ САРМ port future INDEX KE CAPM INTL CAP BUD cap stru WACC 120% erences: Z18 Rea WA 11:57 1ENG 04-11-2019