Question

9. Problem 8-13 (Nonconstant Growth Stock Valuation) eBook Problem Walk-Through Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 65% per year-during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 15%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent. Grade It Now Save & Continue Continue without saving

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins Σ AutoSum - Cut AC Wrap Text Calibri 11 General E Copy Fill в IU- Merge & Center Insert Delete Format Paste +.0 .00 .00 0 Conditional Format Cell Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fox Y412 AA T U V W х Y Z АВ DO 411 0 412 D1 0.0000 413 D2 0.0000 414 D3 1.0000 1.6500 [1.00*(1+0.65)] 415 D4 2.7225 [1.65*(1+0.65)] 2.9675 [2.7225*(1+0.09)] 416 D5 417 D6 418 D6/(ke-g) P5 419 g= 9% ke- 15% 2.9675/(0.15-0.09) 420 49.46 421 PV OF (DIV +P5) 422 YEAR DIV +P5 PV FACTOR [A]*[B AT 15% [B] [A] 423 1 D1 424 0.0000 0.8696 0.00 425 2 D2 0.0000 0.7561 0.00 3 D3 0.66 426 1.0000 0.6575 4 D4 427 1.6500 0.5718 0.94 428 5 D5 P5 52.1813 0.4972 25.94 429 РО - 430 ANSWER VALUE TODAY = 27.54 431 UTILITY, SHARPE, beta CONvexity DGM RESI e beta DIR right YIELD bond portfolio LEASING PV, FV, ANNUITY clean КЕ САРМ port future INDEX INTL CAP BUD cap stru WACC E 120% Rea erences: Z18 WA 01:35 1ENG 20-11-2019