Question

A-Z Computech Corporation is expanding rapidly and currently needs to retain all of its eamings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 46% per year during Years 4 and 5; but after Year 5. growth should be a constant 9% per year. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. х HATHI Open spreadsheet If the required return on Computech is 13%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations $ Check My Work Reset Problem

Answer 1

Amwa Calculation of stock prie today, Formula . Bri 6 con est en translation in the nation Home where Dividend en Year 3, D3, D4, Ds & D6 is 4,546. respectively. Ke= Required nate retun. Growth rate. free Dy Ds D3 = $1.50 1.50x(1+0.46) = $1.50 x1.46 $2-19. $ 2.19 *(1+0.46) $2.19 * 1.46 y $3.1974, $ 3.1974 x (1+0,09) 7 $3.1974 x 109 es $3.4852 D6 = $ 3.1974 + $3.4852 (1.1395 (1.13) Pru $2.19 + x $1.50 (1.13) + 3 (1.13) (0.13-0.09) (1.13) $1.0396 + $ 1-3432 + $1.7354 + $ 47.2907 11 $51.41 Amwer.