*** BOTH QUESTIONS NEED TO BE ANSWERED IN EXCEL FORMULA FORMAT*** 2. you plan to

Question

*** BOTH QUESTIONS NEED TO BE ANSWERED IN EXCEL FORMULA FORMAT***

2. you plan to buy bulldog corportation stock. you predict that bulldog will pay dividends of $2 in year 1 and $3 in year 2, respectively. you are also confident that you can sell the stock for $100 per share at the end of year 2. if you require a 10 percent return on sock, what is its fair price from your perspective?

PV DIV=

PV PRICE=

INTRINSIC VALUE=

3. company BMI will experience a supernatural growth rate of 20% in the next two years. the growth rate will then level off to 5% from year 3 and beyond. the most recent dividend payment was $2.00 and the requaired rate of return for XYZ stock is 10%. what is the intrinsic value of BMI stock?

D1=

D2=

P2=

PV(D1+D2)=

PV(P2)=

INTRINSIC VALUE=

Explanation / Answer

Question no 2 Year cash flow present value@10% present value of cash flow 1 2 0.909090909 1.818181818 2 3 0.826446281 2.479338843 2 100 0.826446281 82.6446281 Value of the share 86.94214876 question no 3 Year Expected dividend 0 2 1 2.4 20% 2 2.88 20% 3 3.024 5% cost of equity 10% growth rate 5% Value of share = expected dividend/ Ke- g Value of share = expected dividend/ Ke- g 60.48

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