Question

Carnes Cosmetics Co.'s stock price is $47, and it recently paid a $1.00 dividend. This dividend is expected to grow by 27% for the next 3 years, then grow forever at a constant rate, g; and r_s = 13%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

B с D E F 0 1 1.27 $ 2 1.61 $ 3 2.05 1.00$ А 3538 Carnes Cosmetics 3539 Dividends 3540 Cost of equity 3541 Constant Growth rate 3542 Stock Price 3543 3544 27% $ 13% 8.28%i 47.00 Goal Seek ? Х SBS3542 1 Set cell: To value: 47 By changing cell: SRS3541

Formulae

A B D E F O =C3539*(1+$B$3539) =D3539*(1+$B$3539) =E3539*(1+$B$3539) 3538 Carnes Cosmetics 3539 Dividends 3540 Cost of equity 3541 Constant Growth rate 3542 Stock Price 0.27 0.13 0.0828084512931024 =F3539*(1+B3541)/(B3540-B3541)