Question

QBISBN-978130563597 58snapshotld 10247318tid-4114523358 Online Activity: Nonconstant growth Q Search this courseShantal Video Excel Online Structured Activity: Nonconstant growth Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, t does not pay dividends. However investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly-at a rate of 41% per year-during Years 4 and 5; but after Year 5, growth should be a constant 5% 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 However, Open spreadsheet If the required return on Computech is 13%, what is the value of the stock t intermediate calculations. oday? Round your answer to the nearest cent. Do not round your Reset Problem Check My Work Next Back 0

Answer 1

The value of the stock today is $8.40

Please see the screenshots for the calculations

4 $0.71 41% Y ear Dividen<d Growth rate Required return PV Stock value $1.04 5% $0.00 13% S8.40 S0.99 41% $0.00 S0.00 S0.50 4 $0.00 S0.35 $7.08 6 $0.00 $0.43 $0.54

Screenshot with formulas

Ycar Dividend Growth rate Rcquired return 0.13 PV Stock valuc-SUM(D6:16) -C3*1+D4) -F341-G4) 0.41 -D3*(1E4) -G3 (1+H4) -G4 H3(1+14) 0.05 0.5 4.

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