During the last five years, Foot Locker, Inc. (FL) has paid dividends of $2.00, $2.20, $2.50, $2.75,
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Question:
During the last five years, Foot Locker, Inc. (FL) has paid dividends of $2.00, $2.20, $2.50, $2.75, and $3.00 per share, respectively. Estimate the current value of FL using a three-stage DDM. Key assumptions are listed below:
- Stage 1 would last 5 years and growth rate would be the arithmetic average of last four years' dividend growth rate.
- Stage 2 would last 8 years with a linearly declining growth rate.
- Stage 3 would have growth rate of 3% in perpetuity.
- Required return on equity for FL is 12%.
What is the terminal value of FL based on these assumptions.
Related Book For
Financial Reporting Financial Statement Analysis and Valuation
ISBN: 978-0324302950
6th edition
Authors: Clyde P. Stickney
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