Sara Inc's most recent earnings per share were $2.00. Sara has a consistent policy of paying...

Sara Inc's most recent earnings per share were $2.00. Sara has a consistent policy of paying out 30% of its earnings as dividend. Researchers say that Sara earnings will grow at a constant rate of 10% over the next 5 years, and then will grow at 5% after this. The cost of capital is 9%. a. using the norma two-stage dividend growth model( use gordon growth to find terminal value) find the value of the stock please explain formula to make chart preferably in excel

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Expert Solution

Year	Dividend	Terminal value	Net cash flow
1	0.6600		0.6600
2	0.7260		0.7260
3	0.7986		0.7986
4	0.8785		0.8785
5	0.9663	25.36553	26.3318
6	1.0146

		Stock price	$19.57

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jeff jeffy answered 4 months ago

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