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Suppose the risk-free rate is 3.55% and an analyst assumes a market risk premium of 6.21%. Firm A just paid a dividend o...

Suppose the risk-free rate is 3.55% and an analyst assumes a market risk premium of 6.21%. Firm A just paid a dividend of $1.19 per share. The analyst estimates the β of Firm A to be 1.47 and estimates the dividend growth rate to be 4.03% forever. Firm A has 268.00 million shares outstanding. Firm B just paid a dividend of $1.59 per share. The analyst estimates the β of Firm B to be 0.71 and believes that dividends will grow at 2.96% forever. Firm B has 189.00 million shares outstanding. What is the value of Firm B?

A stock just paid a dividend of $2.29. The dividend is expected to grow at 28.58% for five years and then grow at 3.42% thereafter. The required return on the stock is 11.08%. What is the value of the stock?

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Answer #1

1.
=1.59*1.0296/(3.55%+0.71*6.21%-2.96%)
=32.74717

2.
=2.29*(1.2858/1.1108)+2.29*(1.2858/1.1108)^2+2.29*(1.2858/1.1108)^3+2.29*(1.2858/1.1108)^4+2.29*(1.2858/1.1108)^5+2.29*(1.2858/1.1108)^5*1.0342/(11.08%-3.42%)
=82.39523

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