SpreadSpreadsheets are especially useful for computing stock value under different assumptions. Consider a firm that is expected to pay the following dividends:
Year 1 2 3 4 5 6
$1.20 $1.20 $1.50 $1.50 $1.75 $1.90 and grow at 5 percent thereafter
A. Using an 11 percent discount rate, what would be the value of this stock?
B. What is the value of the stock using a 10 percent discount rate? A 12 percent discount rate?
C. What would the value be using a 6 percent growth rate after year 6 instead of the 5 percent rate using each of these three discount rates?
D. What do you conclude about stock valuation and its assumptions?
Part 1 of this Assignment to be posted to Turnitin should be a Word document that explains your responses to the 4 subpart questions described above. Sub part D asks for your personal views on stock valuations. It is my expectation that the majority of your explanations be devoted to that subpart of the assignment.
Please use APA formatting and be sure your response is at least one (1) and 1/2 page in length double spaced. Remember focus on your own thoughts and provide citations and references if you use the insights from other sources including the textbook.
Part 2 of this Assignment is to be posted in an Excel document and should lay out clearly your response to subparts a), b) and c) above. Remember I am expecting you to use the formula function of Excel to calculate your answers to each of the subparts of the question. Remember to include your name and other labeling information on the Excel spreadsheet.