2. Home Depot (HD) recently paid a annual dividend of $1.50 per share. Using a one period...
Question:
2. Home Depot (HD) recently paid a annual dividend of $1.50 per share. Using a one period dividend growth model, what is the price of one share of HD stock if the terminal dividend growth rate is 5%? Assume HD has a cost of equity of 10%.
3. Home Depot (HD) recently paid a annual dividend of $1.50 per share. Using a multi-period dividend growth model, what is the price of one share of HD stock if HD grows its dividend by 11% for the first two years and then from year 3 grows its dividend at 4% (terminal growth rate). Assume HD has a Beta of 0.9, the expected market return is 8% and the risk free rate is 3%.
4. Intel (INTC) just reported free cash flow to equity (FCFE) of $15.45 per share. Using a multi-period free-cash flow to equity model, what is the price of one share of INTC stock if INTC grows its FCFE by 25% for the first two years and then from year 3 grows its FCFE at 2.5% (terminal growth rate). Assume INTC has a Beta of 2.1, the expected market return is 5% and the risk free rate is 1%.
Financial management theory and practice
ISBN: 978-1439078099
13th edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt