9. value 10.00 points Marcel Co. is growing quickly. Dividends are expected to grow at a...

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Question

9. value 10.00 points Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for the next 3 years

Answer 1

Answer #1

rate positively ..

we have to use dividend discount model to compute the terminal value
Price today is the present value of future cash flow

i	ii	iii=i+ii	iv	v	vi=iv*v
year	Dividend	Terminal value	total cash flow	PVIF @ 11%	present value
1	3.0250		3.03	0.9009	2.73
2	3.6603		3.66	0.8116	2.97
3	4.4289	57.02	61.45	0.7312	44.93

					50.63

Terminal value = Divided in year 4/(required rate - growth rate)
		4.4289*103%/(11%-3%)
		57.02

Price today =				$ 50.63

Ans =					$ 50.63

Answer 2

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