f this is your hame network for somew office) trust this location work 9-6: Valu
ID: 1175499 • Letter: F
Question
f this is your hame network for somew office) trust this location work 9-6: Valuing Nonconstant Growth Stocks Nonconstant growth valuation Hart Enterprises recently paid a dividend, Do, of firm's required return is 8% a. How far away is the horizon date? $2.00. It expects to have nonconstant growth of 15% for 2 years followed by a consta nt rate of 6% thereafter. The L. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. 11. The terminal, or horizon, date is Year O since the value of a common stock is the present value of all future expected dividends at time zero. III. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. IV. The terminal, or horizon, date is the date when the growth rate V. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. constant. This occurs at the beginning of Year 2 c. What is the firm's intrinsic value today, Po? Round your answer to two decimal placesExplanation / Answer
a)It is option v, since these is the definition of horizon date
b)year dividned*(1+g).(k-g)
=2*(1+15%)^2*(1+6%)/(8%-6%)
=140.19
c)Intrinsic value=(2*(1+15%)/1.08^1)+(2*(1+15%)^2/1.08^2)+(140.19/1.08^2)
=124.58
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