PERSONAL FINANCE (LL)
PERSONAL FINANCE (LL)
13th Edition
ISBN: 9781337885942
Author: GARMAN
Publisher: CENGAGE L
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Chapter 3.1, Problem 3CC
Summary Introduction

To Explain: Financial goals follow from one’s value.

Concept Introduction: Financial planning: It helps a person to plan the inflow and outflow of funds properly. Financial planning is the tool with help of it a person never comes in financial crunch. It includes thinking in advance about how to get funds, where to use it, and who uses it.

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I have attatched two related pictures to calculate a value of a compay using a DCF model. Please show how to get residual value like in the picture shown.
A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
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