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Assume Highline Company has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After then, Highlines earnings are expected to grow at the current industry average of 5.2% per year. If Highlines equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell?

Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.

1 > * BEI LE v > 0 9 % | B4 X usually the Given Data section. A B C D E F G H | 5 6 $ 7 8 Dividend Growth rate (1) Growth period (1) Growth rate (2) Equity cost of capital 0.96 11% 5 5.2% 8.5% 9 10 11 12 13 14 Dividend next year Dividend in 6 years PV first 5 dividends PV remaining dividends Stock price 15 16 17 18

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