Question

A) Assume Gillette Corporation will pay an annual dividend of $0.68 one year from now. Analysts expect this dividend to grow at 12.3% per year thereafter until the 44th year.​ Thereafter, growth will level off at 2.4% per year. According to the​dividend-discount model, what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 8.8%​?

B) Assume Highline Company has just paid an annual dividend of $1.02. Analysts are predicting an 10.8% per year growth rate in earnings over the next five years. After​ then, Highline's earnings are expected to grow at the current industry average of 5.1% per year. If​ Highline's equity cost of capital is 8.5% per year and its dividend payout ratio remains​ constant, for what price does the​ dividend-discount model predict Highline stock should​ sell?

Answer 1

a

	Required rate=	8.80%
Year	Previous year dividend	Dividend growth rate	Dividend current year	Horizon value	Total Value	Discount factor	Discounted value
1	0	0.00%	0.68		0.68	1.088	0.625
2	0.68	12.30%	0.76364		0.76364	1.183744	0.64511
3	0.76364	12.30%	0.85756772		0.85756772	1.287913472	0.66586
4	0.85756772	12.30%	0.96304855	15.409	16.37204855	1.401249858	11.68389
	Long term growth rate (given)=	2.40%			Value of Stock =	Sum of discounted value =	13.62
Where
Current dividend =Previous year dividend*(1+growth rate)^corresponding year
Unless dividend for the year provided
Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 4 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

Please ask remaining parts seperately, questions are unrelated