Holt Enterprises recently paid a dividend, D0, of$1.00. It expects to have nonconstant growth of 13% for 2 yearsfollowed by a constant rate of 4% thereafter. The firm's requiredreturn is 8%.
- How far away is the horizon date?
- The terminal, or horizon, date is Year 0 since the value of acommon stock is the present value of all future expected dividendsat time zero.
- The terminal, or horizon, date is the date when the growth ratebecomes nonconstant. This occurs at time zero.
- The terminal, or horizon, date is the date when the growth ratebecomes constant. This occurs at the beginning of Year 2.
- The terminal, or horizon, date is the date when the growth ratebecomes constant. This occurs at the end of Year 2.
- The terminal, or horizon, date is infinity since common stocksdo not have a maturity date.
-Select-
- What is the firm's horizon, or continuing, value? Round youranswer to two decimal places. Do not round your intermediatecalculations.
$
- What is the firm's intrinsic value today,PÌ‚0? Round your answer to two decimal places.Do not round your intermediate calculations.
$
