Question

** need formula or excel formula please You are considering the purchase of a stock that reported earnings per share of $2.68 in the most recent fiscal year. You expect the firm’s earnings to grow at 18% for the next ten years. After that you feel the growth in earnings will be 2.50% into the future. If you require a return of 15% on such an investment, what are you willing to pay for the shares today?

Answer 1

Share price= $59.39

Workings Assuming 100% dividend payout

Year	Earnings	Horizon value=E10*(1+g)/(k-g)	Net Cash flow
1	3.16		3.16
2	3.73		3.73
3	4.40		4.40
4	5.20		5.20
5	6.13		6.13
6	7.23		7.23
7	8.54		8.54
8	10.07		10.07
9	11.89		11.89
10	14.03	115.02	129.05

Book1- Excel AutoSave Oi Sign in Comments Share O Tell me what you want to do File Home Formulas Review View Help Insert Draw Page Layout Data Σ X Insert A A Calibri 11 General Delete Sort & Find & Filter Select Conditional Format as Cell Paste в I A B IU Format 0 T T Formatting Table Styles Clipboard Font Alignment Number Styles Cells Editing г. D27 A В C E F G H J Horizon value E10* (1+g)/(k-g) Net Cash flow 25 Earnings 2.68 118% Year 26 1 -C26+D26 |-C27+D27 -C26*118% 27 2 C27*118 % -C28*118 % 28 C28+D28 29 4 C29+D29 C29*118% C30+D30 30 C30*118% 31 -C31+D31 C31*118% 32 7 -C32+D32 C32*118 % C33*118 % C33 +D33 33 8 34 9 C34+D34 -C34*118% C35*102.5%/(15%-2.5%) 35 10 -C35+D35 36 NPV(15%,E26:E35) 37 Price 38 39 40 A1 Sheet2 Sheet3 Sheet1 Sheet4 +100 % Ready E e ENG 11:06 AM ха (?