The Giraffe Corporation pays dividends on an annual frequency. One year from now the firm will pay its next dividend, which market analysts expect to be $10. The analysts expect that the dividend will grow at g1 = 20% for 3 years, after which it will grow at g2 = 3% in perpetuity. The market capitalization rate for the firm is 6% - what is the current stock price?
d1 = 10
d2 = 12
d3 = 14.4
p3 = 14.4*1.03/(0.06-0.03) = 494.4
Cf1=10
CF1 = 12
CF3 = 14.4 + 494.4
I=6
NPV=447.31
First: this is Level I question; you shouldn’t be posting it in the Level II forum.
Second: you already posted this in the Level I forum; you shouldn’t be posting the same question twice, even if they’re both in the correct place.
Thanks for the reply, CPK. You had no way of knowing this (unless you’d seen the thread in the Level I forum, which I assume you haven’t done, as you likely would have answered there if you had), but the OP has said that he doesn’t use a financial calculator, so your answer, while excellent in the context you had every right to expect, is rather useless under the circumstances.
Thank you so much I appreciate now I understand the formula!
sorry if i post this here was a mistake… about the financial calculator what is the issue if i want use a normal calculator or excel insteed of a finamcial calc.
thank you
EE
it matters because you’re not going to have an excel spreadsheet in front of you during the exam. It matters because you can’t take a “normal calculator” to the exam. You can only take an approved financial calculator. But, you already knew that…
But I just started I have many years in fron of me to do the exam (it’s not a preority), I want to understand twhat is behind… on it
I guess I was confused since you have labeled yourself as a ‘level 1 candidate’
You have already violated the code of ethics by saying you are candidate but you ahve no enrolled in the exam.
#FAIL.
Sorry i didn t know…was not my intension to violet the ethic code!
Don’t worry about the comments here - most are harmless…
thank you!! many nice peolple here… -( I ll look for other forum “less formal” than this!
Im not that nice. Stop wasting our time with easy level 1 questions
…unless you are that cutie in the office 