Forecast EPS and DPS of Dijon, Inc. are provided below.  Forecast horizon ends in Year 6.  Required rate of return on equity is 10 per cent and the book value of equity at year₀ is $47.00 per share.  Determine the value of the stock at Year₀. Use at least 3 dp. The terminal growth rate in residual earnings (RE) and abnormal earnings growth (AEG) are the same as their actual growth rates in the terminal year over the year prior to that.

 

Year	EPS ($)	DPS ($)	BPS ($)	Required Earnings @10%	Residual Earnings (RE) $	Earnings from reinvested dividend @ 10%	Cum-dividend earnings	Normal earnings @ 10% ($)	Abnormal Earnings Growth (AEG) @ 10% ($)
Now			47.00000				--
1	4.00000	1.00
2	5.00000	1.20
3	6.10000	1.30
4	7.20000	1.40
5	7.84700	1.30
6	8.57205	1.30

 

Required:

Fill in the missing values of the above table for Dijon, Inc.

Answer rating: 100% (QA)

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