Round all dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percent rounded to one decimal place 48. Malcolm Manufacturing, Inc. just paid a $2.00 annual dividend (that is, D0 = 2.00). There will be no dividend payment for the next two years (i.e., at t = 1 and t = 2). In year three (t = 3), the dividend is expected to be $5.00. The dividend will then grow at 10% annually for the next 3 years (i.e., at t = 4, t = 5 and t = 6) and thereafter (i.e., beginning at t = 7) dividends will grow at a rate of 3% annually forever. Assuming a required return of 14%, what is the current price of the stock? 49. Victoria is interested in adding some KLM, Inc. stock to her retirement account. She observes that the stock just paid a dividend of $4.00 (i.e., D0 = 4.00). Based on her estimates, dividends will grow at 20% for the next two years (i.e., in years 1 and 2) and at 5% per year forever after that (i.e., in years 3, 4, 5, ..., ∞). Assuming a discount rate of 11.6%, Victoria estimates the value of each share of KLM, Inc. stock to equal $____
Round
all dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percent
rounded to one decimal place
48. Malcolm Manufacturing, Inc. just paid a $2.00 annual dividend (that is, D0 = 2.00). There will be no dividend
payment for the next two years (i.e., at t = 1 and t = 2). In year three (t = 3), the dividend is expected to be
$5.00. The dividend will then grow at 10% annually for the next 3 years (i.e., at t = 4, t = 5 and t = 6) and
thereafter (i.e., beginning at t = 7) dividends will grow at a rate of 3% annually forever. Assuming a required
return of 14%, what is the current price of the stock?
49. Victoria is interested in adding some KLM, Inc. stock to her retirement account. She observes that the stock
just paid a dividend of $4.00 (i.e., D0 = 4.00). Based on her estimates, dividends will grow at 20% for the next
two years (i.e., in years 1 and 2) and at 5% per year forever after that (i.e., in years 3, 4, 5, ..., ∞). Assuming
a discount rate of 11.6%, Victoria estimates the value of each share of KLM, Inc. stock to equal $______.
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