Question

1. Ivanhoe, Inc., management expects to pay no dividends for the next six years. It has projected a growth rate of 25 percent for the next seven years. After seven years, the firm will grow at a constant rate of 5 percent. Its first dividend, to be paid in year 7, will be $3.61. If the required rate of return is 17 percent, what is the stock worth today? (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

2. Cullumber Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 7 percent. If the required rate of return is 21.00 percent, what is the current value of the stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

Answer 1

1)

B61 . : X fix A B 52 53 01 54 D2 55 D3 $ - 56 D4 57 D5 $ . 58 DO 59 D7 $ 3.61 60 D8 $ 3.79 61 09 $ 3.98 62 Stock price in 8 years $ 33.17 63 3.98/(17%-5%) =+B60*1.05 C D PVIF @ 17% Present value 0.855 $ 0.731 $ 0.624 $ 0.534 $ 0.456 $ 0.390 $ 0.333 $ 1.20 0.285 $ 1.08 0.285 $ 9.45 64 Stock worth today $ 11.73

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