NONCONSTANT GROWTH VALUATION Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant...

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NONCONSTANT GROWTH VALUATION
Holt Enterprises recently paid a dividend, D0, of $2.75. Itexpects to have nonconstant growth of 18% for 2 years followed by aconstant rate of 3% thereafter. The firm's required return is17%.
Q1: How far away is the horizon date?
A: The terminal, or horizon, date is the date when the growthrate becomes nonconstant. This occurs at time zero.
B: The terminal, or horizon, date is the date when the growthrate becomes constant. This occurs at the beginning of Year 2.
C: The terminal, or horizon, date is the date when the growthrate becomes constant. This occurs at the end of Year 2.
D: The terminal, or horizon, date is infinity since commonstocks do not have a maturity date.
E: 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.
Q2: What is the firm's horizon, or continuing, value? Round youranswer to two decimal places. Do not round your intermediatecalculations. $ _
Q3: What is the firm's intrinsic value today, P?0? Round youranswer to two decimal places. Do not round your intermediatecalculations. $ _

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Q1 Non constant model for valuation consists of a period of high or supernormal growth rate for few years and after that growth stabilises to a constant slower growth rate Value of a stock or firm is the present value of its future cash flows Future cash flows for high growth period See Answer

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NONCONSTANT GROWTH VALUATIONHolt Enterprises recently paid a dividend, D0, of $2.75. Itexpects to have nonconstant growth of 18% for 2 years followed by aconstant rate of 3% thereafter. The firm's required return is17%.Q1: How far away is the horizon date?A: The terminal, or horizon, date is the date when the growthrate becomes nonconstant. This occurs at time zero.B: The terminal, or horizon, date is the date when the growthrate becomes constant. This occurs at the beginning of Year 2.C: The terminal, or horizon, date is the date when the growthrate becomes constant. This occurs at the end of Year 2.D: The terminal, or horizon, date is infinity since commonstocks do not have a maturity date.E: 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.Q2: What is the firm's horizon, or continuing, value? Round youranswer to two decimal places. Do not round your intermediatecalculations. $ ___________Q3: What is the firm's intrinsic value today, P?0? Round youranswer to two decimal places. Do not round your intermediatecalculations. $ ___________