Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a...

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Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a dividend of $2.20 per sh

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Answer 1

Answer #1

Value as on year 8=(D8*Growth rate)/(Discount rate-Growth rate)

=(2.2*1.032)/(0.14-0.032)

=21.02(Approx).

Hence current value=Future dividend and value*Present value of discounting factor(rate%,time period)

=2.2/1.14^8+21.02/1.14^8

=$8.14(Approx).

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Answer 2

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