Suppose Footlocker’s Inc. Will pay dividends of $ 5, $7, $12, $9 for first four years...

Suppose Footlocker’s Inc. Will pay dividends of $ 5, $7, $12, $9 for first four years respectively. Then it grows at the rate of 11 percent for next three years. Then it grows at the rate of 6 percent for next three years. What value you will place on this stock if investor requires nine percent return over the period?

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Expert Solution

value you will place on this stock is $65.07
Statement showing Current Price
Particulars	Time	PVf 9%	Amount	PV
Cash inflows (Dividend)	1.00	0.9174	5.00	4.59
Cash inflows (Dividend)	2.00	0.8417	7.00	5.89
Cash inflows (Dividend)	3.00	0.7722	12.00	9.27
Cash inflows (Dividend)	4.00	0.7084	9.00	6.38
Cash inflows (Dividend)	5.00	0.6499	9.99	6.49
Cash inflows (Dividend)	6.00	0.5963	11.09	6.61
Cash inflows (Dividend)	7.00	0.5470	12.31	6.73
Cash inflows (Dividend)	8.00	0.5019	13.05	6.55
Cash inflows (Dividend)	9.00	0.4604	13.83	6.37
Cash inflows (Dividend)	10.00	0.4224	14.66	6.19
Current Price of Stock				65.07

jeff jeffy answered 2 years ago

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