Questions Problem 9.04 Question 4 of 21 2. Check My Work 3. Problem 9-4 Nonconst

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Questions Problem 9.04 Question 4 of 21 2. Check My Work 3. Problem 9-4 Nonconstant growth valuation Holt Enterprises recently paid a dividend, Do, of $2.25. It expects to have nonconstant growth of 20% for 2 years followed by a constant rate of 7% thereafter. The firm's required return is 15% 6. Oa. How far away is the horizon date? I. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero II. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2 III. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2 IV, The terminal, or horizon, date is infinity since common stocks do not have a maturity date V. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero 8. 9. DELL 10 O A new v installed Recover version 12 13. O 14. O 15. O 16 O 17 O 18. O 19. b. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. Do not round your intermediate calculations. $43.33 Please c c. What is the firm's intrinsic value today, Po? Round your answer to two decimal places. Do not round your intermediate calculations. Upda (Rec $33.75 Rem Hide Feedback Partially Correct Type here to search

Explanation / Answer

Answer is 37.57

=+(3.47)*(1.07)/(0.15-0.07) =46.37

Period Dividend Cash Flow PV factor PV 1 2.70 0.8696 2.35 2 3.24 0.7561 2.45 3 3.47 0.6575 2.28 3 46.37 0.6575 30.49 P0 37.57

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