Tester Ltd is a fast-growing, dividend-paying corporation. It has just paid a dividend of $1.00 per...

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Tester Ltd is a fast-growing, dividend-paying corporation. Ithas just paid a dividend of $1.00 per share. An investment analystexpects its dividend to grow rapidly at 30% for the next fiveyears, and the n at a 5% growth rate for the future years.
a. If the required rate of return is 10%, using a Two-StageDividend Growth Model, what is the value of this stock?
b. If the stock’s reported earnings per share (EPS) is $2.00,and the analyst uses a 30x price earnings ratio (P/E) to value thestoc k, what is the value of this stock? What is the target stockprice in one year if its dividend payout ratio remains thesame?
c. Give two possible reasons for the difference in value of thestock deriving from (a) and (b) above.

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a Value of stockPresent value of future cash flows Future Value of cash flowCash flow1RN N Year of cash flow Rdiscount rate Required return1001 D0Dividend just See Answer

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Tester Ltd is a fast-growing, dividend-paying corporation. Ithas just paid a dividend of $1.00 per share. An investment analystexpects its dividend to grow rapidly at 30% for the next fiveyears, and the n at a 5% growth rate for the future years.a. If the required rate of return is 10%, using a Two-StageDividend Growth Model, what is the value of this stock?b. If the stock’s reported earnings per share (EPS) is $2.00,and the analyst uses a 30x price earnings ratio (P/E) to value thestoc k, what is the value of this stock? What is the target stockprice in one year if its dividend payout ratio remains thesame?c. Give two possible reasons for the difference in value of thestock deriving from (a) and (b) above.