Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. can anyone solve for this problem step by step acc

can anyone solve for this problem step by step accounding to the second picture ?...

80.2K

Verified Solution

Question

Accounting

can anyone solve for this problem step by step accounding to the second picture ? image
image
Variable Growth Model: Example A multiple-growth rate company pays a current dividend of $1 and is expected to grow at the higher rate of 40% a year for three years, at the end of which time the new growth rate is expected to be a constant 8% per year. The required rate of return is 12%. What is the intrinsic value of the firm? DDM: Variable Growth Model If two (or more) growth rates are given in the problem, it is a multiple growth rate problem. To solve it, 1. First determine the actual dollar dividend for each year of the high growth rate period 2. Take the present value of each of these dividends, using the required rate of return as the discount rate 3. Add the present values together to obtain the PV of the first n years of dividends (High growth period) 4. Solve for the constant growth value of the stock using the second growth rate. To do this, take the last dividend computed above for the high growth period and compound it up by the new (lower) growth rate. 5. Discount this price back to the present. (If the high growth is for 3 years, discount back for 3 periods; if for 10 years, 10 periods... 6. Add the two values together

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

What is the structure and style of this excerpt from a sample personal essay?A. The...

Biology
Q

A restaurant recorded how many tacos were included in each order This data is summarized...

Statistics
Q

Potassium dichromate (K2Cr2O7) is a bright orange salt that can be converted to a blue-violet solution...

Chemistry
Q

Diagram and describe how eukaryotic cellular respiration works. Include a labeled diagram of the appropriate cell...

Biology
Q

Draw an EER that models the given requirements. Consider modeling a bank: The bank keeps personal information of...

Programming
Q

6 What s a popular type of Buddhist statue A Jumping Buddha B Fighting Buddha...

Biology
Q

4 to O Problem 4 28 pts A 100 mm long rectangular bar with a...

Basic Math
Q

An environmentalist wishes to conduct a hypothesis test on the percentage of cars driven in...

Statistics
Q

Select all polynomials that are in standard form 8x 4 2x 5

Algebra
Q

The production department of Zan Corporation has submitted the following forecast of units to be...

Accounting
Q

how to calculate: LONG TERM SOLVENCY RISK Liabilities to shareholders equity ratio Interest...

Accounting
Q

Entries for issuing par stock question: On October 31, Legacy Rocks Inc., a marble contractor,...

Accounting