Question: Example 4: Constant Dividend Growth SOLUTION IS NEEDED IN EXCEL FORMAT ONLY. (EXCEL FORMULA) Unlike bond pricing, Excel does not have built-in functions for stock

Example 4: Constant Dividend Growth

SOLUTION IS NEEDED IN EXCEL FORMAT ONLY. (EXCEL FORMULA)

Unlike bond pricing, Excel does not have built-in functions for stock pricing, so we need to create our own equations. We will begin with constant growth in dividends. Suppose we have a stock with the following:

Current dividend:		$ 2.40
Dividend growth rate:		5.00%
Required return:		13.00%

With this growth rate, the dividend next year will be:

Dividend next year:

So, the stock price today with the constant dividend growth model is:

Stock price today:

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Constant Dividend Growth Jnlike bond pricing, Excel does not have built-in functions for stock pricing, so we need to create our own equations. We will begin with constant growth in dividends....

Question: Constant Dividend Growth Unlike bond pricing, Excel does not have built-in functions for stock pricing, so we need to create our own equations. We will begin with constant growth in...

Unlike bond pricing, Excel does not have built-in functions for stock pricing, so we need to create our own equations. We will begin with constant growth in dividends. Suppose we have a stock with...

As with any financial instrument, the price of a bond is just the present value of the future cash flows. What is the price of Coupon rate: Years to maturity: Yield to maturity: Par value: 8.00% 10...

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

Listen to the following videos and then complete the assignments using the changed numbers on the guidance report. Place your answers on the guidance report. Open the Guidance Report and rework the...

Can someone help me with this? I need it by tomorrow chapter 2 Issues in Accounting for Corporate Debt and Equity istockphoto Learning Objectives Be able to articulate the advantages and...

Hi, this assignment is Urgent! The instruction is in the attachment ?final project guidelines and rubric?. Using Home Depot Financial Report, (here?s the link)...

I need these problems worked out because I can't grab the concept , is their any possible way it can be done in 5 hours please! I never had to use this extra feature up until now so I was wondering...

Sheet 2 (Unit 2) is where I have started my work. Ch. 4 Problem 2a-c Calculating Future Values : Compute the future value of $3,200 compounded annually for a. 10 years at 6 percent b. 10 years at 8...

Let f. : R1 R, i = 1,..,n, be functions. For each a E R. define (a) = {ZE Rn : _iz.-a). Prove the following: If E (a) and if n:-1 in (zi-e, then solves the problem min y A(ri) s.t. x E (a).

Return to Targets 2010 annual report. For instructions on how to access the report online, see the Continuing Financial Statement Analysis Problem in Chapter 2. Now, answer the following questions:...

The discount rate is the rate that: Multiple Choicebanks charge each other on loans of excess reserves.banks charge for loans to corporate customers.banks charge securities dealers to finance their...

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...