# The Richter Company, a technology company, has been growing rapidly. After examining the company's operations very carefully,

## Question:

1. Calculate the required rate of return in cell H2 using the CAPM.

2. Calculate the dollar amount of each dividend for the first 14 years in cells B5 through B18, and the present value of these amounts in cells C5 through C18. Be sure to allow for the change in growth rates in year 9.

3. In cell G19, calculate the price of the stock at the beginning of year 15, using the then-constant growth rate of 5 percent.

4. In cell G20, discount the price found in 3) back to today using the proper nu periods for discounting.

5. Sum the present value of the dividends in cell C21. Add to this the present value price found in 4) by putting this value in C22.

6. In cell C23, add the values found in 5) in cell C24.

Price at beginning of Year 15 =

PV of Price today =

Sum of PV of dividends for first 14 years

+ PV of Price at Beginning of Year 15

Sum of PV of dividends and PV of price

The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...

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## Step by Step Answer:

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