Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Please see attched problem
problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant
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3. Delta Company has some very exciting prospects in the near future. As a result it is expected to grow at a rate of 20% for the next ywo
years. After the year it will grow at 7% indefinitely. The required rate of return on the stock is currently 14% and Delta paid a dividend of
$2.60 (i.e., Do ) recently. What should the value of Delta's stock per share be for today? Please answer this question using the following
worksheet template. Also, make sure to show all of your work. (Hint: Check Sunsetbuilders Two Growth Phase Model.xls
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(Supplemental Resources) and slide pates 8 and 9 of M04L02 Lecture Notes Review the case of Sunsetbuilder)
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38 Required rate or return (Discount rate)
39 Year
40 Growth Rate
14%
20%
7%
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DO
D1
D2
D3
44 Dividends
45 Terminal Value (TV)
46 Present values:
2.60
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49 PV of D1
50 PV of D2
51 PV of TV
52 Value of Stock as of Year 0
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II. Risk_Ret CAPM
III. CAPM Portfolio Beta
IV.Stock Valuation
4.
...
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