assignment 1.1

# assignment 1.1 - 8.00 from end year 5 to inFnity P at end...

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Problem #2 PV initial (recent) D 2.00 D1 2.24 1.96491 D2 2.51 1.93044 r 14.00% D3 2.81 1.89657 D4 3.15 1.8633 PV of D's growth for 5 yrs 12.00% D5 3.52 1.83061 9.49 D6 3.81 constant growth 8.00% from end year 5 to inFnity P at end of year 5 63.44 using D6/(r-g) (terminal value) PV of the above P 32.95 initial price \$42.44 year 6 DY 6.00% using D6 and P end-5 year 6 CGY P at start of year 6 63.44 D7 4.11 P at end of year 6 68.52 using D7/(r-g) year 6 CGY 8.00% r = DY + CGY 14.00%

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Problem #3 PV initial (recent) D 2.00 D1 2.24 1.96491 D2 2.51 1.93044 r 14.00% D3 2.81 1.89657 D4 3.15 1.8633 growth for 8 yrs 12.00% D5 3.52 1.83061 D6 3.95 1.79849 D7 4.42 1.76694 PV of D's D8 4.95 1.73594 14.79 D9 5.35 constant growth 8.00% from end year 5 to inFnity P at end of year 8 89.13 using D9/(r-g) (terminal value) PV of the above P 31.25 initial price \$46.03 • price increases with a longer supernormal growth period Problem #4 PV initial (recent) D 2.00 D1 2.30 2.01754 D2 2.65 2.03524 r 14.00% D3 3.04 2.05309 D4 3.50 2.0711 PV of D's growth for 5 yrs 15.00% D5 4.02 2.08927 10.27 D6 4.34 constant growth
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Unformatted text preview: 8.00% from end year 5 to inFnity P at end of year 5 72.41 using D6/(r-g) PV of the above P 37.61 initial price \$47.87 • price increases with a greater supernormal growth rate Problem #5 PV initial (recent) D 2.00 D1 2.24 1.96491 D2 2.51 1.93044 r 14.00% D3 2.81 1.89657 D4 3.15 1.8633 PV of D's growth for 5 yrs 12.00% D5 3.52 1.83061 9.49 D6 3.88 constant growth 10.00% from end year 5 to inFnity P at end of year 5 96.93 using D6/(r-g) (terminal value) PV of the above P 50.34 initial price \$59.83 • price increases with a greater constant growth rate Problem #6 This is two-stage growth, where the initial period growth rate is zero. At the start of year 6 (5 years from today) the CG model applies. D6 = 2.00 P at end of year 5 \$50.00 (i.e. start of year 6) using D6/(r-g) PV of the above P which is today's price \$28.37...
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## This note was uploaded on 11/06/2010 for the course ECON 11 taught by Professor Tsuash during the Spring '10 term at University of San Francisco.

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assignment 1.1 - 8.00 from end year 5 to inFnity P at end...

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