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3. Benton corp, just paid a dividend (D) of $1.94. Dividends are expected to grow next three years, then at a rate of 5.4% fo
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Answer #1

PV of Div = Div * PVF(r%, n)

Year CF Formula Calculation
1 $      2.48 D0(1+g)^1 1.94(1.28^1)
2 $      3.18 D0(1+g)^2 1.94(1.28^2)
3 $      4.07 D0(1+g)^3 1.94(1.28^3)
4 $      4.29 D3(1+g) 4.07(1.054)

PV of Div:

Year CF PVF @9.6% Disc CF
1 $      2.48         0.9124 $      2.26
2 $      3.18         0.8325 $      2.65
3 $      4.07         0.7596 $      3.09
PV of Div $      8.00

P3:

P3 = D4 / [ Ke - g ]

= $ 4.29 / [ 9.6% - 5.4% ]

= $ 4.29 / 4.2%

= $ 102.14

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