History Bookmarks Profiles Tab Window Help 30% One X Watch 'Chapter part2x w/webapps/assessment/take/launchspfcourse assessment_ide_326081_18 course_dw_1089491&content_id-7090959_18stepun Question Completion Status Find the value of the Stock with non-constant growth Consider the publicly traded firm Gamma Corp. Their last dividend paid was 54. 14. The growth rate is expected to be 7% for the need three years and then 3% forever after that. The firm's required return is 11.0%. What is the best estimate of the current stock price? Do not round intermediate calculations Stop 1: draw the dividend timeline for this problem and grow each dividend by the appropriate rate-stop at your 4 . 01.(4.14)*(1.07) - Keep awers at 4 decimals . 02 (4.14)1.07/1.07) D3-(4.141(1.07/1.07/1.07) D4-(4.141.07)(1.07/1.07)(1.03) - stop here Step 2. Using the dividend paid in year 4 the first dividend calculated using constant growth) find the horizon value of the stock D/-all remember and should be used as decimals (0.11) and (0.03) since they are going into an equation use the required rate of return for and the stable growth rate for Step 3: Be careful that this value belongs at year 3 one year prior to the start of stable growth-remember this rule from the . Now discount everything in the timeline including the Honzon Value, D1, D2, and D3 to present value (remember finding the PV on uneven cash flow streams in Chapter 9 Add up all the present values and this is the answer Do not include the initial 4.14 in your answer this dividend is in the past, so it is not included. We are interested in future dividend that a shareholder would received the stock was purchased today . Your answer represents the estimate of the stocks true value in dollars depending on how you rounded intermediate arswers, you should be within 51.00 of the answer $59.29 $65.29 $70.36 $79.54 Click Save and Submit to save and submit. Click Save All Answers to see all annars Save AR 070 RAGA MacBook Air 30