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What will be the horizon-terminal value price of the stock

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Reference no: EM132980234

Question - X Corp. just paid a dividend of $1.50 per share (D0What will be the expected dividend payment next year (D1). The firm's dividend is expected to grow at 10% per year for the next 4 years and 5% thereafter. Answer the following questions and estimate the firm's intrinsic value per share using the non-constant dividend discount model (DDM). The cost of equity is 10.6%. This problem has a potential value of 2 test bonus points. Partial credit will be given.

What will be the expected dividend payment at the end of year 2 (D2)?

What will be the expected dividend payment at the end of year 3 (D3)?

What will be the expected dividend payment at the end of year 4 (D4)?

What will be the horizon/terminal value price of the stock at the end of year 4 (P4) according to the constant growth dividend discount model (DDM)?

Use the values you found above to plot the total yearly cash flows in the appropriate spaces on the time line below. These should match the cash flows you would use to compute the present value of the stock under the non-constant growth Dividend discount model (DDM).

Year 1 Cash Flow

Year 2 Cash Flow

Year 3 Cash Flow

Year 4 Cash Flow

What is the intrinsic value of X Corp.'s stock under the non-constant growth DDM?

Reference no: EM132980234

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