9. value 10.00 points Marcel Co. is growing quickly. Dividends are expected to grow at a...

Question

Question

9. value 10.00 points Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for the next 3 years

business finance

Answer 1

Answer #1

rate positively ..

we have to use dividend discount model to compute the terminal value
Price today is the present value of future cash flow

i	ii	iii=i+ii	iv	v	vi=iv*v
year	Dividend	Terminal value	total cash flow	PVIF @ 11%	present value
1	3.0250		3.03	0.9009	2.73
2	3.6603		3.66	0.8116	2.97
3	4.4289	57.02	61.45	0.7312	44.93

					50.63

Terminal value = Divided in year 4/(required rate - growth rate)
		4.4289*103%/(11%-3%)
		57.02

Price today =				$ 50.63

Ans =					$ 50.63

Answer 2

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