Just paid dividend High growth Intermediate growth Stable growth Required return Current Price Solution Find dividends...

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Just paid dividend High growth Intermediate growth Stable growth Required return Current Price Solution Find dividends until growth levels off Divl Div2 Div3 Div4 Given Time Find Find the expected future price at the beginning of stable growth period P3 Find the price Find the present value of the expected cash flows Cash Flow Dividend yield Capital gains $1.00 50% 20% 5% 16% 1 2 3 PV Po P3 = DV 4 r-g Div Div Div + P = ¯ (1+r)* (1+r)² * (1+r) Just paid dividend High growth Intermediate growth Stable growth Required return Current Price Solution Find dividends until growth levels off Divl Div2 Div3 Div4 Given Time Find Find the expected future price at the beginning of stable growth period P3 Find the price Find the present value of the expected cash flows Cash Flow Dividend yield Capital gains $1.00 50% 20% 5% 16% 1 2 3 PV Po P3 = DV 4 r-g Div Div Div + P = ¯ (1+r)* (1+r)² * (1+r)

Answer rating: 100% (QA)

Step 1 Find dividends until growth levels off Assuming the companys growth rate declines from 50 to ... View the full answer