In: Finance
Holt Enterprises recently paid a dividend, D0, of $2.25. It expects to have nonconstant growth of 12% for 2 years followed by a constant rate of 6% thereafter. The firm's required return is 15%.
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Part a
How far away is the horizon date?
Answer :
IV. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
Part b
Horizon value : 44.92
Part c
Intrinsic value : 36.41