Question: Really need help with these 3 questions. I did the first 6, which should give you some context as to what is happening with the


D) Assume that Bon Temps is expected to experience supernormal growth of 30% for the nex 3 years, then to return to its long-run constant growth rate of 6%. What is the stock's value under these conditions? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4? J) Suppose Bon Temps is expected to experience zero growth during the first three years and then to resume its steady-state growth of 6% in the fourth year. What is the stock's value now? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4? K) Assume that Bon Temps' earnings and dividends are expected to decline by a constant 6% per year-that is, g = 26%. Why might someone be willing to buy such a stock, and at what price should it sell? What would be the dividend yield and capital gains yield in each year? Year Dividend Year 1 2.12 Year 2 2.2472 Year 3 2.382 Current Stock price = Dividend at year 1/(Cost of Capital - Growth rate) = 2.12/ (0.16 - 0.06) 21.2 Expected Value on year from now= = Dividend at year 2/(Cost of Capital - Growth rate) = 2.2472/ (0.16 - 0.06) 22.472 Dividen yield= Dividend during year 1/ Share price = 2.12/ 21.2 10.00% Cpital Gain Yield= Capital Gain/Share price = ( 22.472 - 21.2)/21.2 6.00% Total Return =[Dividend +Capital Gain)/ 21.2 =(2.12+1.272)/21.2 16.00% Expected rate of return is 16% since with this rate we got current stock price of 21.2 in Q2 Stock price Dividend at year 1/(Cost of Capital - Growth rate) = 2/(0.16 -0.00) 12.5
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