Charlie's cheese factory has a very precise business plan for 2019-2028, shown below (you can download...

 

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Charlie's cheese factory has a very precise business plan for 2019-2028, shown below (you can download it as an Excel spreadsheet from the book website): Year Profits Investment Dividend 2019 80 50 30 2020 77 49 2021 86 49 2022 91 47 2023 98 47 2024 98 48 2025 109 200 -91 2026 120 57 2027 119 57 2028 125 61 28 37 44 51 50 63 62 64 (in 2025 the main storage facility will need to be replaced, hence the higher investment). From 2029 onwards, dividends will increase at a rate of 2% a year forever. The interest rate is 6%. (a) Use the Gordon growth formula (8.1.2) to calculate the value that the factory will have in 2028 after paying dividends (i.e. the value not including the value of the dividends it will pay in 2028). (b) Compute the present value of the entire infinite stream of dividends that starts in 2019. Charlie's cheese factory has a very precise business plan for 2019-2028, shown below (you can download it as an Excel spreadsheet from the book website): Year Profits Investment Dividend 2019 80 50 30 2020 77 49 2021 86 49 2022 91 47 2023 98 47 2024 98 48 2025 109 200 -91 2026 120 57 2027 119 57 2028 125 61 28 37 44 51 50 63 62 64 (in 2025 the main storage facility will need to be replaced, hence the higher investment). From 2029 onwards, dividends will increase at a rate of 2% a year forever. The interest rate is 6%. (a) Use the Gordon growth formula (8.1.2) to calculate the value that the factory will have in 2028 after paying dividends (i.e. the value not including the value of the dividends it will pay in 2028). (b) Compute the present value of the entire infinite stream of dividends that starts in 2019.