Verizon LTE 11:33 PM * 88% Back Chapter 12 -Homework.pdf Directieas-Chapter 12 H

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Verizon LTE 11:33 PM * 88% Back Chapter 12 -Homework.pdf Directieas-Chapter 12 HOMEWORK Piease try your best on these anowers The more you work on these the better off you will be for the test I have creatod a PowcrPoint as gides to try to get you through these questions The numbers will be difficrent but the processes the same The answers and solutions will be shared on. April th If the answer is a whole dollar number, please repoet the answer in currency format, wih.commas and no decimals (examplc St0,000) I the mumber is negative plcase expross it as (3100O) If the answer is a percent-then pilene express it with the percerage sign and rounded-ap to one- decimal For example, ifyou ps?89 as a percent-you would need to express as 79% Ifyou p negative 7.89% you would need to express as

Explanation / Answer

1.
Price=D0*(1+g)/(r-g)
=>36=2.4*(1+g)/(12%-g)
=>g=5%
So, Dividend after 6 years=2.4*(1+5%)^6
Price after 5 years=(2.4*(1+5%)^6)/(12%-5%)=45.95
2.
D3=D0*(1+g)^3
D3=2*1.05^3
D3=2.31525
3.
Price=D0*(1+g)/(r-g)
=>Price=2*(1+5%)/(12%-5%)
=>Price=30
4.
Price at the end of 3rd year=2*1.05^4/(12%-5%)=34.72875
Price at the end of 4th year=2*1.05^5/(12%-5%)=36.46519
Expected Capital Gains yield at the end of 3 years=36.46519/34.72875-1=5%

Note as per policy, I have answered 4 questions

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