A

Problem $12-27$

The Nonconstant, or Supernormal Dividend Growth Model

Flash in the Pan Corporation

Given:

Calculations:

a$.$ Present value of Dividends during the supernormal growth period:

Expected future dividends during

the supernormal growth period

Year $1$ growth rate is provided in $($B$14).$ After that, multiply the preceding year by that year's expected growth rate in row $13.$

Present values of dividends during

the supernormal growth period

Use the PV function: $=-$PV$($assumed required rate of return $($B$15),$year $($from row $13),,$ expected future divedends $($from row $22)[$Notice the double comma to skip PV to get you to FV$?]$

Total

b$.$ Present value of dividends during the normal growth period $($year $6$ and on$)$

Terminal value at end of year $5$

per Equation $12-7$

Present value of terminal value

Use the PV function again: $=-$PV$($B$15,$F$12,,$F$33)[$Notice the double comma to skip PV to get you to FV$?]$

c$.$ Total present value per share

Add the present value of the dividends to the present value of the terminal value of Flash in the Pan Corp. stock