If a company has supernormal growth of 30% for 3 years, then expects a long-run constant...

 

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If a company has supernormal growth of 30% for 3 years, then expects a long-run constant g = 6%, what is Po? r is 13%. r, = 13% g = 30% Do = 2.00 P = Σ t=1 0 1 D₁ N Do X (1+g₁)² (1 + r)' r, = 13% Do = 2.00 Common Stock Valuation: Variable-Growth Model g = 30% g = 30% Present value of dividends during initial growth period Can no longer use constant growth model. However, growth becomes constant after 3 years. = Po 2 1 D₂ g = 30% + 3 g = 30% g=6% D₂ 2 If we have supernormal growth of 30% for 3. years, then a long-run constant g = 6%, what is Po? r is 13%. 1 (1 + r) N X g = 30% Present value of price of stock at end of initial growth period 4 3 DN 1 F's 82. ... D₁ g = 6% 4 ….. Is the stock price based on short-term growth? The current stock price is $54.11. The PV of dividends beyond year 3 is $46.11 (P3 discounted back to t = = 0). The percentage of stock price due to "long-term" dividends is: ● ● ● $46.11 $54.11 = Common Stock Valuation: Other Approaches to Stock Valuation Price = Lamar Company is expected to earn $2.60 per share next year. Assuming a industry average P/E ratio of 7, the firms per share value would be: If a company has supernormal growth of 30% for 3 years, then expects a long-run constant g = 6%, what is Po? r is 13%. r, = 13% g = 30% Do = 2.00 P = Σ t=1 0 1 D₁ N Do X (1+g₁)² (1 + r)' r, = 13% Do = 2.00 Common Stock Valuation: Variable-Growth Model g = 30% g = 30% Present value of dividends during initial growth period Can no longer use constant growth model. However, growth becomes constant after 3 years. = Po 2 1 D₂ g = 30% + 3 g = 30% g=6% D₂ 2 If we have supernormal growth of 30% for 3. years, then a long-run constant g = 6%, what is Po? r is 13%. 1 (1 + r) N X g = 30% Present value of price of stock at end of initial growth period 4 3 DN 1 F's 82. ... D₁ g = 6% 4 ….. Is the stock price based on short-term growth? The current stock price is $54.11. The PV of dividends beyond year 3 is $46.11 (P3 discounted back to t = = 0). The percentage of stock price due to "long-term" dividends is: ● ● ● $46.11 $54.11 = Common Stock Valuation: Other Approaches to Stock Valuation Price = Lamar Company is expected to earn $2.60 per share next year. Assuming a industry average P/E ratio of 7, the firms per share value would be: