Homework Answers
6.1: Horizon value = P5=D6/(k-g)
= 5.14*106%/(15%-6%)
=60.54
Value of share = PV of dividends+ PV of horizon value
= 14.96+60.54/1.15^5
= 45.06
6.2: Value of share next year = PV of dividends in 2019 + PV of horizon value in 2019
= 13.36+60.54/1.15^4
= 47.97
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