Suppose TSLA’s current price is P=$80. Analysts expect TSLA not to pay any dividends for the next 5 years, then start paying a $10 dividend per share in year 7. The expected dividend growth will then be constant at g. TSLA’s discount rate is 12%. The expected growth rate g after year 7 implied by the two-stage DDM is g= % (answer with 1 decimal, e.g. 1.2%)

Suppose TSLA’s current price is P=$80. Analysts expect TSLA not to pay any dividends for the next 5 years, then start paying a $10 dividend per share in year 7. The expected dividend growth will then be constant at g. TSLA’s discount rate is 12%. The expected growth rate g after year 7 implied by the two-stage DDM is g= % (answer with 1 decimal, e.g. 1.2%)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section7.6: Valuing Nonconstant Growth Stocks

Problem 3ST

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