Question

Wildhorse Corp. is a fast-growing company whose management expects it to grow at a rate of 30 percent over the next two years and then to slow to a growth rate of 13 percent for the following three years. If the last dividend paid by the company was $2.15.

It then aasks for D1 through D5.

Then asks for Compute the present value of these dividends if the required rate of return is 14 percent. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

I need help with the last part. The PV

Answer 1

year	growth	Dividend calc.	Divident	PV factor 14%	present value
0		2.15	2.15	0
1	30%	2.15+30%	$2.80	0.8772	$2.45
2	30%	2.795+30%	$3.63	0.7695	$2.80
3	13%	3.6335+13%	$4.11	0.675	$2.77
4	13%	4.105855+13%	$4.64	0.5921	$2.75
5	13%	4.639616+13%	$5.24	0.5194	$2.72

present value = dividend * PV factor at 14%

the PV factor can be calculated by 1/(1+r)^n where r is 14% and n is year.

the PV factor can also be looked up from PVIF table at 14% for year 1 to 5.