Cellular Systems paid a $3 dividend last year. The dividend is expected to grow at a constant rate of 5 percent over the next two years. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). Round all values to three places to the right of the decimal point where appropriate.
a. Compute the anticipated value of the dividends for the next three years. That is, compute D1' D2' and D3'; for example, D1 is $3.15 ($3.00 1.05). Round all values throughout this problem to three places to the right of the decimal point.
b. Discount each of these dividends back to the present at a discount rate of 12 percent and then sum them.© BrainMass Inc. brainmass.com October 24, 2018, 8:03 pm ad1c9bdddf
Calculates stock price by discounting dividends.
Stock price valuation and IRR question for Buffet's Berkshire purchase of GEICO
I would like to receive a draft response to the following question which relates to the attached case study. Please show formula and calculation in response.
'Note the Value Line forecast of dividends (on P20). Value Line's forecasts of a share price of $90 at the low end of the range and $125 at the high end of the range at YR2000. What would Buffet expect the stock price to be at YR2000 to achieve his 28% average annual gain (or IRR) on the GEICO investment in 1995?'View Full Posting Details