Question

LO eBook Holt Enterprises recently paid a dividend, Do, of $1.50. It expects to have nonconstant growth of 17% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 16%. 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 the growth rate becomes nonconstant. This occurs at time zero. III. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. IV. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. V. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. -Select- b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is the firm's intrinsic value today, Po? Do not round intermediate calculations. Round your answer to the nearest cent. $ ch 6:53 PM 3/21/2020

what is the answer for a, b and c. please label the answer respectively as a,b,c.

Answer 1

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H w x ENG 99+ 04:28 22-03-2020 B 21 х HV36 fx HR HS HT HU HV HW HX HY HZ IA IB 15 16 17 holt a IV The terminal or horizon date is the date when growth rate becomes constant. This occurs at the end of year 2 18 19 20 21 22 23 b GROWTH RATE YEAR 0 1 DIVIDEND 1.5000 1.7550 2.0534 2.2176 17.00% 2 17.00% 24 25 26 3 8.00% 27 28 P2 = D3/(ke-g) P2 = 2.2176/(0.16-0.08)= 27.72 ANSWER HORIZON VALUE = 27.72 29 c YEAR 30 31 32 DIVIDEND + P2 1.7550 1 PV FACTOR @ 16% 0.8621 0.7432 PV OF DIV + P2 1.51 22.13 2 29.7736 33 34 PO = 23.64 ANSWER INTRINSIC VALUE = 23.64 35 36 37 38 KE CAPM UTILITY, SHARPE, beta CoNvexity DGM beta port future INDEX INTL CAP BUD SANDRINE LEASING PORTFOLOQ DIR right clean YIELD bc ...