Question

Please show calculations

1 pts D Question 2 BUNNER MANINC stock has paid a curent dividend of SS per share und this dride d is expected to grow at a rate of30% for the first three years and then slow to a rate of 4% for the forseeable future, the interest rate is 12%, uhan the current price? Write down the for the problem along with the correct answer. ala with appropriate numbers iaserted to solve HTML Ede Paragraph

Answer 1

a.
	Present Value of first three year's dividend
	Year	Dividend	Discount factor	Present value
	1	$           10.40	0.893	$                9.29
	2	$           13.52	0.797	$              10.78
	3	$           17.58	0.712	$              12.51
		Total		$              32.57
b.	Present value of terminal value of dividend
	Terminal value means time period from which growth in dividend is stable on a flate rate for whole life.
			Terminal Value	=	D3*(1+g)/(Ke-g)			Where,
				=	17.58*(1+0.04)/(0.12-0.04)			D3	$    17.58
				=	$ 228.54			g	4%
								Ke	12%
c.	Present value of terminal value
	Present value of terminal value			=	$ 228.54	x	0.712
				=	$ 162.67
d.	Present value of all dividend			=	$    32.57	+	$ 162.67
				=	$ 195.24
	According to dividend discount model, current price of stock is the present value of dividend.
	So, Price of stock is		$ 195.24