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

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 10 months ago

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