4. Airlines Inc. just paid a $3.50 dividend, and it is expected to grow at 45%...

4. Airlines Inc. just paid a $3.50 dividend, and it is expected to grow at 45% for the next 3 years.

After 3 years the dividend is expected to grow at the rate of 4% indefinitely.

If the required return is 9.8%, what is the stock's value today?

Need it in spreadsheet form

Expert Solution

stock's value today is $163.32
Statement showing Current Price
Particulars	Time	PVf 9.8%	Amount	PV
Cash inflows (Dividend)	1.00	0.9107	5.0750	4.62
Cash inflows (Dividend)	2.00	0.8295	7.3588	6.10
Cash inflows (Dividend)	3.00	0.7554	10.6702	8.06
Cash inflows (Price)	3.00	0.7554	191.3275	144.53
Current Price of Stock				163.32

P3= D4/ke-g
P3=10.6702*1.04/(9.8% - 4%)
P3=11.097/(5.8%)
P3=$191.3275

jeff jeffy answered 2 years ago

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