Answer:
Price =[PVF15%,1*D1]+[PVF15%,2*D2]+[PVF15%,3*D3]+[PVF15%,4*D4]+[PVF15%,4*Terminal value at year4 ]
60 = [.86957* 1.3]+[.75614*1.69]+[.65752*2.197]+[.57175*2.8561]+[.57175*TV]
= 1.1304+ 1.2779+ 1.4446+ 1.6330+ .57175TV
60 = 5.4859+.57175TV
Terminal value = [60-5.4859]/.57175
= 54.5141/.57175
= $ 95.3460
Terminal value=D4(1+g)/(Rs-g)
95.3460 =2.8561(1+g)/(.15-g)
95.3460(.15-g)= 2.8561-2.8561g
14.3019- 95.3460g = 2.8561-2.8561g
95.3460g-2.8561g = 14.3019-2.8561
92.4899 g = 11.4458
g = 11.4458/92.4899
= .1238 or 12.38%
Growth after year4 = 12.38%
**D1 =1(1+.30)=1.3
D2 =1.3(1+.3)=1.69
D3 = 1.69(1+.3)= 2.197
D4= 2.197(1+.3)= 2.8561
Answer:
g = 0,116559243
Explanation:
First we solve for the present value of the know dividends:
[tex]\left[\begin{array}{ccc}#&Cashflow&Discounted\\Zero&1&\\1&1.3&1.13\\2&1.69&1.28\\3&2.197&1.44\\4&2.8561&1.63\\\end{array}\right][/tex]
We add them and get: 5.48
as the stock sells for 60 dollar the 54.52 represent the horizon value discounted:
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
[tex]\frac{Maturity}{(1 + .15)^{4} } = 54.52[/tex]
Horizon value = 95.36281912
Now, we solve for grow:
[tex]\frac{D_{n+1}}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\[/tex]
[tex]\frac{2.8561(1+g)}{0.15-g} = 95.36281912\\[/tex]
[tex] 2.8561 + 2.8561g = 0.15 x 95.36281912 - 95.36281912g [/tex]
[tex]95.36281912g + 2.8561g = 14,304422868 - 2.8561[/tex]
[tex] g = 11,448322868 / 98,21891912[/tex]
g = 0,116559243
