Question

1. A stock just paid a dividend of $1.58. The dividend is expected to grow at 20.65% for five years and then grow at 4.73% thereafter. The required return on the stock is 11.20%. What is the value of the stock? Round to 2 decimal places.

2. A stock just paid a dividend of $1.58. The dividend is expected to grow at 25.17% for two years and then grow at 4.56% thereafter. The required return on the stock is 11.83%. What is the value of the stock? Round to 2 decimal places.

3. The risk-free rate is 2.29% and the market risk premium is 8.37%. A stock with a β of 1.25 just paid a dividend of $1.45. The dividend is expected to grow at 21.51% for three years and then grow at 4.01% forever. What is the value of the stock? Round to 2 decimal places.

Answer 1

1)

fix B =+B101*1.0473 C $ 1.91 $ 2.30 B102 X A 96 97 D1 98 D2 99 D3 100 D4 101 D5 102 D6 103 Stock price in 5 years 104 D PVIF @ 11.2% Present value 0.899 $ 1.71 0.809 $ 1.86 0.727 $ 2.02 0.654 $ 2.19 0.588 $ 2.38 2.77 $ 3.35 4.04 4.23 $ 65.38 4.23/(11.2%-4.73%) 0.588 $ 38.45 105 Value of the stock today $ 48.61

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