Reference no: EM132544330

Communications Fiji Limited just paid dividends of $2 per share. Assume that over the next three years dividends will grow as follows, 5% next year, 15% in year two, and 25% in year 3. After that growth is expected to level off to a constant growth rate of 10% per year. The required rate of return is 15%. Calculate the intrinsic value using the multistage model.

Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.

Question i. Calculate the dividends for years 1, 2, and 3. 

Question ii. What is the price of the stock in year 5?

Question iii. Calculate the present value today of dividends for years 1 to 5.

Question iv. What is the price of the stock today (P0)?