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m (6 parts) You examine the stock of Campus Brewery which is estimated to pay dividends of $2.80 and $2.32 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.2% per year, forever. The required return is 10.6% 26 a. What is the dividend in year 3? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 12.34.) a. Dividend in year 3 b. What formula did you use to calculate part a? (Write in the number from your formula sheet you used to calculate this) b. Formula Number (div 3) c. What is the share price in two years? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) c. Share price in year 2 ? ? LIW d. What formula did you use to calculate part c? (Write in the number from your formula sheet you used to calculate this) d. Formula Number (price 2) e. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. Current share price f. What formula did you use to calculate part e? (Write in the number from your formula sheet you used to calculate this) f. Formula Number (current price) D P= R Price/share 5 PE = EPS 6 EPS Earnings (Revenue - Cost) # shares outstanding D(t+1) 2 Pt= (R-g) 7 EPS = R= Deti PE + 8 DPRT Dt DPR = EPS 3 8 10 Annual Dividend DY = Price New Price - Old Price Pric CGY = Old Price 9 11 Pric 14 12 CY = Annual Coupon Price 13 New Price - old Price CGY = Buy Price 1- 15 PB = C 1 (1+YTM) YTM F (1+YTM) 17 16 1 (1+r) 1 (1+r) PVA= PMT PVAD= PMT r 10 New Price - Old Price Price = Benchmark PE ratio x EPS Old Price 11 Price = Benchmark P/S ratio x Sales/Share 14 New Price - old Price Buy Price (1+R) = (1+r)(1+h) TM) 17 1 11 13 12 CY= 14 Annual Coupon Price CGY New Price - old Price Buy Price (1+R) = (1+r)(1+h) 15 PB = C 1 (1+YTM) YTM F (1+YTM) 17 16 (1+r)" (1+r) PVA= PMT PVAD: PMT (1 + r) r 18 FVA= PMT |(1+r) 19 FVADEPMT (1+r) r PMT= PMT 20 PVp= PVA 1 (1+r) 21 r r 1 PVA= PMT (1+r)" PVAD= PMT (1+r)" (1 + r) r |(1+r)" 18 FVA= PMT 10-1 ((1+r)" -1 r 19 FVAD: PMT (1+r) 1+r) PMT 20 PVp= PMT= PVA 1 (1+r) r 21 r 22 23 24 25 T FV=PV(1+r) FV PV= (1+r)t r= -1 t= FV In PV In (1+r)

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