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Sagot :
Answer:
Net present value= $25.17
Step-by-step explanation:
We are told that The last dividend paid was $1.55 and that the dividend growth rate is constant at 1.5% for 2 years.
Thus;
1) After 1st year;
1.55 × (1 + 0.015) = 1.57325 Div1
After 2nd year;
1.57325 × (1 + 0.015) = 1.59685 Div2
After that 2 years it grows at 6% Constant rate forever;
1.59685 × (1 + 0.06) = 1.69266 Div3
Let's now use the dividend formula which grows in perpetuity at a rate of "g" since required return is 12%:
Thus;
V = 1.69266/(0.12 - 0.06) = 28.211
Thus; Div2 = 28.211 + 1.59685 ≈ 29.80785
Now, using the financial calculator of the Cash Flow function, we have:
Div0 = 0
Div1 = 1.57325
Div2 = 29.80785
i% = 12
Net present value = (1.57325/(1 + 0.12)) + ((1.59685 + 28.211)/(1 + 0.12)²)
Net present value= $25.17
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