Using the attached template and instructions below, compute the current stock price for The Drop Back Five and Kick Company, a football manufacturer. Current dividend is $1.50/share. Dividends are expected to grow at 15% for 3 years, and after that, the dividends will grow at 4%. Investors require 8%.
Instructions: You must compute the stock price under two scenarios. Details are below.
Compute the price of the stock at t = 0.
Find the dividends.
Put the dividends on an infinite timeline, which starts at 0 and ends at infinity. ONLY PLACE dividends on the timeline that an investor would receive if he/she bought the stock today.
Show the “true math” of the price of the stock at t = 0.
Show the collapsed math of some stock price, by “taking care of infinity”. Use the first behaving dividend.
Show the “true math” of the price of the stock that you found in part I. D.
Show a FINITE timeline, placing the appropriate D’s and Price (P) on that timeline and complete the problem by finding P0.
Compute the price of the stock at t = 0.
Show the collapsed math of some future stock price, by “taking care of infinity”. Use the second behaving dividend.
Show the “true math” of the price of the stock that you found in part II. A.
Show a FINITE timeline, placing the appropriate D’s and Price (P) on that timeline and and complete the problem by finding P0.