Review Help Editing Arial v10 E Me S 8 Styles v * Conditional Formatting v General onstant growth 3 Dividend D nomal growth rate, g. al growth rate, 0 red return, S0 50 46 00% 9.00% 18.00% 46 00% 46.00% 9.00% 3. S0 50 spua fows to conmon stockholders I cash flows to common stockholders Price, P atively, using Excel NPV function Price, P Formulas 46 00% 46 00% 9 00% 2. ends $0 5000 INA NIA NIA NIA flows to common stockholders NIA INIA NIA T cash flows to common stockholders SNIA NIA NIA

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
icon
Related questions
Question

Excel Online Structured Activity: Nonconstant growth

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 $0.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 46% per year - during Years 4 and 5; but after Year 5, growth should be a constant 9% 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.

 

 

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.

$ __________. 

Excel template Saved
9Search (Alt Q
File
Home
Insert
Draw
Page Layout
Formulas
Data
Review
View
Help
Editing v
B A·
Arial
Ev Merge
$ v 8 8 Conditional Formatting
90 $
10
.00
General
Styles v
C15
fx
A
Nonconstant growth
2.
3 Year 3 Dividend, Dy
4 Supernormal growth rate, g.
SNormal growth rate, g.
6 Required return, r.
7.
$0.50
46.00%
9.00%
18 00%
46.00%
46 00%
9 00%
3.
$0.50
4
9.
9.
Dividends
10 Ps
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
Formulas
20
21
22
46.00%
46.00%
9.00%
4
23 Dividends
0.
$0 5000
NIA
NIA
N/A
24 Ps
25 Cash flows to common stockholders
N/A
N/A
NIA
IN/A
26
27 PV of cash flows to common stockholders
N/A
EN/A
ENIA
N/A
EN/A
2.
Transcribed Image Text:Excel template Saved 9Search (Alt Q File Home Insert Draw Page Layout Formulas Data Review View Help Editing v B A· Arial Ev Merge $ v 8 8 Conditional Formatting 90 $ 10 .00 General Styles v C15 fx A Nonconstant growth 2. 3 Year 3 Dividend, Dy 4 Supernormal growth rate, g. SNormal growth rate, g. 6 Required return, r. 7. $0.50 46.00% 9.00% 18 00% 46.00% 46 00% 9 00% 3. $0.50 4 9. 9. Dividends 10 Ps 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 Formulas 20 21 22 46.00% 46.00% 9.00% 4 23 Dividends 0. $0 5000 NIA NIA N/A 24 Ps 25 Cash flows to common stockholders N/A N/A NIA IN/A 26 27 PV of cash flows to common stockholders N/A EN/A ENIA N/A EN/A 2.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Financial Policy and Growth
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education