In: Finance
A stock analyst believes a firm that is currently in financial trouble will soon recover. The analyst believes that the firm will continue paying a constant dividend of $0.74 per quarter for the next 3 years (next 12 quarters). However, after that point in time the analyst will estimate stock value as if the dividend will grow forever at a rate of 4.4% APR compounded quarterly. What is the analysts stock price estimate if using a required return of 16% APR compounded quarterly?
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -