Do it by hand, please do not use EXCEL or any other software!! ...
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Finance
Do it by hand, please do not use EXCEL or any other software!!
Stock is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 20% a year for five years (years 2 through 6, as the stock recovers from a severe recession) and zero thereafter. If the cost of equity for the stock is 10%, what is the value of this stock?
Hint:
1. Find dividends in each period, given the initial growth rate. ________
2. Calculate PH in year 6, given the dividend paid in perpetuity in year six and beyond. ________
3. Discount these values to compute the total present value. _______
Do it by hand, please do not use EXCEL or any other software!!
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