Question

What is the value today of KTS stock if it grows at 12% for 5 years, then 8% for 5 years, and then grows at 5% thereafter?

Create a valuation sheet in MS-Excel similar to the format shown below: ng mga tao 99 SUPERNORMAL GROWTH DO $2.00 Cost of Equity 12.00% 10.00% 10.00% 10.00% D3 10.00% 10.00% DS 10.00% 10.00% D7 10.00% D8 10.00% D9 10.00% D101 5.00% D6 ng g10 P10 Assume KTS currently pays a $2 per share dividend and has a cost of equity of 15%.

Just asked this question but the last answer just copy and pasted the answer from another question that was slightly different... Here is the filled out table if you need it, I just need the answer to the question.

Answer 1

Current dividend = $2 (Do) Cost of Equity = 15% 9. - 12/. = 12% 12% o os os os cã oő = 12% - 12/. 9. = 84 D = 2 +12% = 2.24 Dg - 2-24 +12% = 2:51 Dz = 2:51+1244. - 281 Du = 2.81 + 12% = 3.15 D5= 3.15 + 12%. = 3.52 Do - 3.52 + B - 3.89 Dy = 3.80+ 8% = ull Og = 4.1+8% = 4.43 Da = 4.43 +8% = 4-79 Dio = 4.19 +8% = 5.17 5.11 +5'). = 54.29 Pio - 15%-5% é o = 80% os - Sy 9,0 = 8% oo - St. Po= D(1+9) kerg ke=Cost of capital g= growth rate D = Dividend 5.17(1+0.05) 5.4285 = 54.29 & Piou 15%-5% 10% [ all values are rounded up to two decimals

Cost of equity = 15%. It is used as discount factor to calculate present value of KTS Stock y present value cash flow (Dividend 2.24 2.51 pv factor @ 15% 0.869565 1.9478 0.156144 1.8970 2.81 0.651516 1.8415 3.15 0.511 753 1.1993 1.7524 ă ă oa to us w ro - 3.52 3.80 4.11 0.497111 0.4323 28 1.6451 0.315937 کی کو گر۱۰ 4.13 0.326902 1.45147 4.79 0.284262 1.36312 1. 28015 5.14 54.29 0.247185 0. 247185 13.41961 To Tal 29.95 .. Current value of KTS Stock-$29.95 Po = $29.95