ZuoTi.Pro
Question

Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm over a five-year horizon. (

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

rate positively..

Ans a) Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         1.18         1.39         1.64         1.94         2.29
Terminal price       49.87
Total cash flow         1.18         1.39         1.64         1.94       52.16
PVIF @ 14%    0.8772    0.7695    0.6750    0.5921    0.5194
present value         1.04         1.07         1.11         1.15       27.09       31.45
present value =       31.45
answer as per your required format as below
Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         1.18         1.39         1.64         1.94         2.29
Terminal price       49.87
present value       31.45
Ans b) Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         1.01         1.02         1.03         1.04         1.05
Terminal price     115.61
Total cash flow         1.01         1.02         1.03         1.04     116.66
PVIF @ 10%    0.9091    0.8264    0.7513    0.6830    0.6209
present value         0.92         0.84         0.77         0.71       72.44       75.68
present value =       75.68
answer as per your required format as below
Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         1.01         1.02         1.03         1.04         1.05
Terminal price     115.61
present value       75.68
Ans c) Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         2.26         2.55         2.89         3.26         3.68
Terminal price       78.86
Total cash flow         2.26         2.55         2.89         3.26       82.54
PVIF @ 12%    0.8929    0.7972    0.7118    0.6355    0.5674
present value         2.02         2.04         2.05         2.07       46.84       55.02
present value =       55.02
answer as per your required format as below
Year 1 Year 2 Year 3 Year 4 Year 5
Projected dividend         2.26         2.55         2.89         3.26         3.68
Terminal price       78.86
present value       55.02
0 0
Add a comment
Know the answer?
Add Answer to:
Design a spreadsheet similar to the one below to compute the value of a variable growth...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Question 708 Check My Work (1 remaining) Problem 9-4 Nonconstant growth valuation Holt Enterprises recently paid...

    Question 708 Check My Work (1 remaining) Problem 9-4 Nonconstant growth valuation Holt Enterprises recently paid a dividend, Do, of $4.00. It expects to have nonconstant growth of 15% for 2 years followed by a constant rate of 10 thereafter. The firm's required return is 13%. a. How far away is the horizon date? 1. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. II. The terminal, or horizon, date...

  • 4. Holt Enterprises recently paid a dividend, D0, of $1.00. It expects to have nonconstant growth of 13% for 2 years fol...

    4. Holt Enterprises recently paid a dividend, D0, of $1.00. It expects to have nonconstant growth of 13% for 2 years followed by a constant rate of 9% thereafter. The firm's required return is 15%. How far away is the horizon date? The terminal, or horizon, date is infinity since common stocks do not have a maturity date. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future...

  • Holt Enterprises recently paid a dividend, D0, of $1.75. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, D0, of $1.75. It expects to have nonconstant growth of 15% for 2 years followed by a constant rate of 3% thereafter. The firm's required return is 9%. How far away is the horizon date? The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. The terminal, or horizon, date is the date when the growth rate...

  • Check My Work (am 9-6: Valuing Nonconstant Growth Stocks Nonconstant growth valuation Hart Enterprises recently paid...

    Check My Work (am 9-6: Valuing Nonconstant Growth Stocks Nonconstant growth valuation Hart Enterprises recently paid a dividend, Do. of $2.25. It expects to have no constant growth of 22 for 2 years followed by a constantmate of the The 's more 114 a. How far away is the horizon date? 1. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2 11. The terminal, or horizon, date...

  • Holt Enterprises recently paid a dividend, Do, of $2.75. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, Do, of $2.75. It expects to have nonconstant growth of 21% for 2 years followed by a constant rate of 3% thereafter. The firm's required return is 9%. a. How far away is the horizon date? I. The terminal, or horizon, date is Year O since the value of a common stock is the present value of all future expected dividends at time zero. II. The terminal, or horizon, date is the date when...

  • Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of 14% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 8%. How far away is the horizon date? The terminal, or horizon, date is infinity since common stocks do not have a maturity date. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected...

  • Holt Enterprises recently paid a dividend, D0, of $2.50. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, D0, of $2.50. It expects to have nonconstant growth of 19% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 14%. How far away is the horizon date? The terminal, or horizon, date is infinity since common stocks do not have a maturity date. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected...

  • 3. Problem 8-20 Value a Constant Growth Stock (LG8-5) Financial analysts forecast Limited Brands (LTD) growth...

    3. Problem 8-20 Value a Constant Growth Stock (LG8-5) Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 11.5 percent. LTD’s recent dividend was $0.60. What is the value of Limited Brands stock when the required return is 13.5 percent? (Round your answer to 2 decimal places.) 8. Problem 8-32 Changes in Growth and Stock Valuation (LG8-5) Consider a firm that had been priced using an 8.5 percent growth rate and a 10.5 percent required return....

  • Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of 15% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 19%. How far away is the horizon date? The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at...

  • Holt Enterprises recently paid a dividend, Do, of $1.75. It expects to have nonconstant growth of...

    Holt Enterprises recently paid a dividend, Do, of $1.75. It expects to have nonconstant growth of 23% for 2 years followed by a constant rate of 9% thereafter. The firm's required return is 18%. a. How far away is the horizon date? 1. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. II. The terminal, or horizon, date is infinity since common stocks do not have a...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT