Question

X 5 ? Calculating stock price - Excel FORMULAS DATA REVIEW - Sign In x FILE HOME INSERT PAGE LAYOUT VIEW 8 Arial B IU- - 12 - AA - A - = % Alignment Number - Paste Conditional Format as Cell Formatting Table Styles Cells Editing Clipboard Font Styles C3 The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on A B D E F G H I J The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on the stock, what is the current price? What will the price be in three years? In 15 years? $ 1.95 4% 10.5% Current dividend Dividend growth rate Required return Price in Year Price in Year Price in Year 15 Complete the following analysis. Do not hard code values in your calculations. Dividend in one year Price today $ $ 2.03 31.20 Dividend in 4 years Price in 3 years $ $ 2.28 35.10 $ 3.65 Dividend in 16 years Sheet1 ... + ... O O READY Step 1 of 1 -- Previous + 100% Next

Answer 1

$ 2.03 D1 PO = = DO*(1+g) D1/(Ke-8) 1.95*(1+0.04) 2.028/(0.105-0.04) 2.028 = $ 31.20 = $ 2.28 D4 P3 = = DO*(1+g)^4 D4/(Ke-g) 1.95*(1+0.04)^4 2.281224/(0.105-0.04) = 2.281224 = $ 35.10 D16 $ 3.65 DO*(1+g)^16 = D4/(Ke-8) 1.95*(1+0.04)16 3.652313/(0.105-0.04) = 3.652313 = $ 56.19 P15