Question

ANSWER MUST BE IN EXCEL FORMAT - EXAMPLE - =D7+D9/E8

1. Calculate the payment for the company’s stock.

А в Staal Corporation will pay a $3.40 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company's stock today? $ Dividend next year Dividend growth rate Required return 3.40 4.50% 11% Complete the following analysis. Do not hard code values in your calculations. Price

ANSWER MUST BE IN EXCEL FORMAT - EXAMPLE - =D7+D9/E8

1. Calculate the payment for the company’s stock.

Answer 1

Three variables are included in the Gordon Growth Model formula:

i) D1 or the expected annual dividend per share for the following year

ii) ke or the required rate of return

iii) g or the expected dividend growth rate.

With these variables, the value of the stock can be computed as:

Intrinsic Value = D1 / (ke – g)

EXPECTED VALUE OF THE COMPANY'S STOCK
Particulars	Amount	Remarks
Growth rate (g)	4.50%	A
Required return (Ke)	11.00%	B
Dividend (D1)	$                    3.40	C
Difference between Ke and g	6.50%	D = B - A
expected value of company's stock @ 11%	$                 52.31	E = C ÷ D