Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 35% per year - during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.     Open spreadsheet   If the required return on Computech is 18%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations. $  fill in the blank 2

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 35% per year - during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

 

 
Open spreadsheet

 

If the required return on Computech is 18%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.

$  fill in the blank 2

123
File
C14
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Assignments - you can a...
template - Saved ✓
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A
Nonconstant growth
Arial
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6
7
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9 Dividends
Year 3 Dividend, D3
Supernormal growth rate, gs
Normal growth rate, gn
Required return, rs
Draw
Workbook Statistics
Formulas
fx
Sheet1 +
MindTap - Cengage Lear...
10 P5
11 Cash flows to common stockholders
12
13 PV of cash flows to common stockholders
14 Stock Price, Po
15
16 Alternatively, using Excel NPV function:
17 Stock Price, Po
18
19
20
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22
23 Dividends
24 P5
25 Cash flows to common stockholders
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27 PV of cash flows to common stockholders
28 Stock Price, Po
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30 Alternatively, using Excel NPV function:
31 Stock Price, Po
32
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$1.25
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Transcribed Image Text:123 File C14 4 5 <> Assignments - you can a... template - Saved ✓ Home Insert A Nonconstant growth Arial 5 6 7 8 9 Dividends Year 3 Dividend, D3 Supernormal growth rate, gs Normal growth rate, gn Required return, rs Draw Workbook Statistics Formulas fx Sheet1 + MindTap - Cengage Lear... 10 P5 11 Cash flows to common stockholders 12 13 PV of cash flows to common stockholders 14 Stock Price, Po 15 16 Alternatively, using Excel NPV function: 17 Stock Price, Po 18 19 20 21 22 23 Dividends 24 P5 25 Cash flows to common stockholders 26 27 PV of cash flows to common stockholders 28 Stock Price, Po 29 30 Alternatively, using Excel NPV function: 31 Stock Price, Po 32 < Page Layout V 10 B Formulas B $1.25 35.00% 6.00% 18.00% 0 0 #N/A #N/A about:blank MindTap - Cengage Lear... Data 1 0 0 1 0 0 Review V #N/A Search for tools, help, and more (Option + Q) D View 2 0 0 2 ON 0 0 Help ab #N/A → Excel Online Student Work E Currency 3 $1.25 3 $1.2500 #N/A #N/A F 35.00% 35.00% 4 4 #N/A #N/A #N/A Excel Online Student Work G 35.00% 35.00% 5 > 5 #N/A #N/A #N/A #N/A : H b Similar Questions | bartle... 6.00% 6.00% 6 6 #N/A J K C https://www.chegg.com/... Editing ✓ L Give Feedback to Microsoft + M I Comments N 100% +
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