Suppose that a firms recent earnings per share and dividend

Question

A fast-growing firm recently paid a dividend of $0.90 per share. The dividend is expected to increase at a 20 percent rate for the next four years. Afterwards, a more stable 13 percent growth rate can be assumed.

If a 14.5 percent discount rate is appropriate for this stock, what is its value? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Stock value=

Suppose that a firm's recent earnings per share and dividend per share are $3.80 and $2.80, respectively. Both are expected to grow at 10 percent. However, the firm's current P/E ratio of 19 seems high for this growth rate. The P/E ratio is expected to fall to 15 within five years.

Compute the dividends over the next five years. (Do not round intermediate calculations and round your final answers to 3 decimal places.)
 

Dividends	Years
First year	$
Second year	$
Third year	$
Fourth year	$
Fifth year	$

Compute the value of this stock in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Calculate the present value of these cash flows using a 12 percent discount rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.)