Economics 720 MSFA Program
Fall 2010 John Gonzales
Assignment #1 Answers
1. You are given the following information for company X and the financial markets. (a) rS = 6.46 + 1.4(14 6.46) = 17.02%. P0 = 2.16/(.1702 - .08) = $23.95. (b) The CGY = g, i.e. the
Economics 720 MSFA Program
Spring 2010 John Gonzales
Assignment #2
1. This problem involves valuing a stock with the two-stage growth model and the trailing P/E. The following information is given. Find the price of the stock. initial (recent) D projected
Economics 720 MSFA Program
Fall 2010 John Gonzales
Assignment #1
1. You are given the following information for company X and the financial markets. of stock X = 1.4 recent dividend = $2.00 constant growth rate = 8% projected stock market return = 14% yie
Problem #2 PV 1.96491 1.93044 1.89657 1.8633 1.83061
initial (recent) D r growth for 5 yrs constant growth from end year 5 to innity
2.00 14.00% 12.00% 8.00%
D1 D2 D3 D4 D5 D6
2.24 2.51 2.81 3.15 3.52 3.81
PV of D's 9.49
P at end of year 5 using D6/(r-g)