As companies evolve, certain factors can drive sudden growth.
This may lead to a period of nonconstant, or variable, growth. This
would cause the expected growth rate to increase or decrease,
thereby affecting the valuation model. For companies in such
situations, you would refer to the variable or nonconstant, growth
model for the valuation of the company’s stock.
Consider the case of Portman Industries:
Portman Industries just paid a dividend of $1.68 per share. The
company expects the coming year to be very profitable, and its
dividend is expected to grow by 20.00% over the next year. After
the next year, though, Portman’s dividend is expected to grow at a
constant rate of 4.00% per year.
Assuming that the market is in equilibrium, use the information
just given to complete the table.
- 8 Nonconstant Growth Stock As Companies Evolve Certain Factors Can Drive Sudden Growth This May Lead To A Period Of N 1 (19.31 KiB) Viewed 46 times
Value Term Dividends one year from now (D) Horizon value (@) Intrinsic value of Portman's stock $20.20 The risk-free rate (TRF) is 5.00%, the $21.00 premium (RPM) is 6.00%, and Portman's beta is 1.50. $52.50 What is the expected dividend yield for stock today? $15.00 10.97%
Value Term Dividends one year from now (D) Horizon value (ên) Intrinsic value of Portman's stock premium (RPM) is 6.00%, and Portman's beta is 1.50. The risk-free rate (TRF) is 5.00%, the m $20.19 $24.23 What is the expected dividend yield for $23.97 stock today? 10.97% $18.42
The risk-free rate (TRF) is 5.00%, the market risk premium (RPM) is 6.00%, and Portman's beta is 1.50. What is the expected dividend yield for Portman's stock today? 10.97% 9.62% 10.00% 8.00%