08_20_SOKZAI

08_20_SOKZAI - g = 12 12 12 12 12 15-Component III P 0 =[D...

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Your Code: SOKZAI Chapter: 07 Problem: 03 Component I: Keep Giving Dividend Corp. just paid its shareholders dividend of $2.00 per share. The dividends are expected to grow at 12% for the next 5 years, and then the growth rate will jump to 15% indefinitely. If the required return is 20%, what is the price of the stock today? Component II: 0----------1---------2------3-------4-------5--------6------7-----8----9------------------------ PV? Dividend = $2
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Unformatted text preview: g = 12% 12% 12% 12% 12% 15%----------------------------Component III: P 0 = [D 1 /(R – g 1 )] * {1-[(1+g 1 )/(1+R)]^t}+ [(1+g 1 )/(1+R)]^t [D (1+g 2 )/R-g 2 ] P 0 = [2*(1.12)/(.20 – .12)] * {1-[(1+.12)/(1+.2)]^5} + [(1+.12)/(1+.20)]^5 * [2(1+.15)/(.20-.15)] = 28 * .29175440 + .70824560 * 46 = 40.74842080 Component IV: The calculator cannot solve the two-stage growth rate directly through these five function keys. N I/Y PV PMT FV...
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This note was uploaded on 05/26/2011 for the course FINA 3000 taught by Professor Laplante during the Spring '08 term at UGA.

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