Question

Fey Fashions expects the following dividend pattern over the next seven years: stock's price today if an investor wants to earn The company will then have a constant dividend of $2.60 forever. What is the а. 14%? b. 23 %? a. What is the stock's price today if an investor wants to eam 14 % ? (Round to the nearest cent.) - X Data Table in order to copy its contents into a spreadsheet) (Click on the following icon Year 1 Year 3 Year 4 Year 5 Year 2 Year 6 Year 7 $1.75 $1.89 $2.04 $2.38 $1.50 $1.62 $2.20 Print Done

Answer 1

At 14%

Stock value

15.30

At 23%

Stock value

8.63

Workings

	Year	1	2	3	4	5	6	7	8
	Dividend	1.5	1.62	1.75	1.89	2.04	2.2	2.38	2.6
rate
14%	Horizon value = P7=D8/r	18.57
	Stock value	15.30
23%	Horizon value = P7=D8/r	11.30
	Stock value	8.63

AutoSave o 9.3HD Book1 - Excel Sign in File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do A = = 0 -A A = E Z insert - Delete - Format - 0 X Share Comments AY O Sort & Find & Filter - Select Editing Paste La- General 3$ -% Numberto - Calibri - 11 BIU - B Font - * . Conditional Format as Formatting Table - Cell Styles Clipboard Alignment Styles Cells fio Dividend А L D E F G H I J 2 3 4 5 6 7 8 1.62 1.75 1.89 2.04 2.2 2.38 2.6 Year Dividend 2 1.5 4 rate 5 0.14 Horizon value = P7=D8/r = 2.6/A5 Stock value =NPV(14%,C2:12)+C5/1.1417 8 0.23 Horizon value = P7=D8/r =2.6/A8 Stock value =NPV(23%,C2:12)+C8/1.2347 Sheet1 Sheet2 Sheet3 Ready -- - + 100% ENG 11:40 PM 0 QA D