Chapter 18: Equity Valuation Models 1 Saved Saks is expected to pay a dividend in year...

Question

Question

Chapter 18: Equity Valuation Models 1 Saved Saks is expected to pay a dividend in year 1 of $2.01, a dividend in year 2 of $2

Answer 1

Answer #1

Using Constant Growth Model,

Stock Price in Year 3 = D₃(1 + g)/(r - g)

Stock Price in Year 3 = 2.90(1.08)/(0.11 - 0.08)

Stock Price in Year 3 = $104.40

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Answer 2

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