Question

Holt Enterprises recently paid a dividend, D_{0}, of
$2.00. It expects to have nonconstant growth of 22% for 2 years
followed by a constant rate of 3% thereafter. The firm's required
return is 17%.

- How far away is the horizon date?
- The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
- The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
- The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
- The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.
- The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.

-Select-IIIIIIIVVItem 1 - What is the firm's horizon, or continuing, value? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

- What is the firm's intrinsic value today, ? Do not round
intermediate calculations. Round your answer to the nearest cent.
$

Answer #1

Dividend just paid (D0) = $2.00

Growth rate for 2 years(g) = 22%

Growth rate thereafter(g1) = 3%

Required rate of Return(Ke) = 17%

D1 = D0(1+g) =$2.00(1+0.22)

= $2.44

D2 = D1(1+g) = $2.44*(1+0.22)

= $2.9768

a). Horizon date is the date when the Growth rate becomes Constant. It occurs at the end of year 2.

Hence, option II

b). Calculating the Firm's Horizon value:-

So,
**Horizon Value is $21.90**

b). Calculating the Firm's Intrinsic Value:-

Price = $2.085 + $2.175 + $15.998

Price = $20.26

So,
**Firm's intrinsic Value = $20.26**

If you need any clarification, you can ask in comments.

If you like my answer, then please up-vote as it will be motivating

Holt Enterprises recently paid a dividend, D0, of
$3.00. It expects to have nonconstant growth of 15% for 2 years
followed by a constant rate of 6% thereafter. The firm's required
return is 19%.
How far away is the horizon date?
The terminal, or horizon, date is infinity since common stocks
do not have a maturity date.
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected...

Holt Enterprises recently paid a dividend, D0, of
$1.25. It expects to have nonconstant growth of 20% for 2 years
followed by a constant rate of 5% thereafter. The firm's required
return is 11%.
How far away is the horizon date?
The terminal, or horizon, date is the date when the growth rate
becomes constant. This occurs at the end of Year 2.
The terminal, or horizon, date is infinity since common stocks
do not have a maturity date.
The...

Holt Enterprises recently paid a dividend, D0, of
$1.75. It expects to have nonconstant growth of 12% for 2 years
followed by a constant rate of 9% thereafter. The firm's required
return is 18%.
How far away is the horizon date?
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected dividends
at time zero.
The terminal, or horizon, date is the date when the growth rate...

Holt Enterprises recently paid a dividend, D0, of
$2.25. It expects to have nonconstant growth of 20% for 2 years
followed by a constant rate of 9% thereafter. The firm's required
return is 15%.
How far away is the horizon date?
The terminal, or horizon, date is the date when the growth rate
becomes constant. This occurs at the beginning of Year 2.
The terminal, or horizon, date is the date when the growth rate
becomes constant. This occurs at...

Holt Enterprises recently paid a dividend, D0, of
$3.75. It expects to have nonconstant growth of 24% for 2 years
followed by a constant rate of 3% thereafter. The firm's required
return is 9%.
How far away is the horizon date?
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected dividends
at time zero.
The terminal, or horizon, date is the date when the growth rate...

Holt Enterprises recently paid a dividend, D0, of
$1.75. It expects to have nonconstant growth of 21% for 2 years
followed by a constant rate of 3% thereafter. The firm's required
return is 12%.
How far away is the horizon date?
The terminal, or horizon, date is the date when the growth rate
becomes constant. This occurs at the end of Year 2.
The terminal, or horizon, date is infinity since common stocks
do not have a maturity date.
The...

Holt Enterprises recently paid a dividend, D0, of
$3.00. It expects to have nonconstant growth of 23% for 2 years
followed by a constant rate of 8% thereafter. The firm's required
return is 16%.
How far away is the horizon date?
The terminal, or horizon, date is infinity since common stocks
do not have a maturity date.
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected...

eBook
Holt Enterprises recently paid a dividend, D0, of
$1.25. It expects to have nonconstant growth of 22% for 2 years
followed by a constant rate of 5% thereafter. The firm's required
return is 14%.
How far away is the horizon date?
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected dividends
at time zero.
The terminal, or horizon, date is the date when the growth...

Holt Enterprises recently paid a dividend, D0, of
$2.00. It expects to have nonconstant growth of 24% for 2 years
followed by a constant rate of 4% thereafter. The firm's required
return is 17%.
How far away is the horizon date?
The terminal, or horizon, date is infinity since common stocks
do not have a maturity date.
The terminal, or horizon, date is Year 0 since the value of a
common stock is the present value of all future expected...

4 )
Holt Enterprises recently paid a dividend, D0, of
$1.25. It expects to have nonconstant growth of 21% for 2 years
followed by a constant rate of 6% thereafter. The firm's required
return is 15%.
How far away is the horizon date?
The terminal, or horizon, date is the date when the growth rate
becomes nonconstant. This occurs at time zero.
The terminal, or horizon, date is the date when the growth rate
becomes constant. This occurs at the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 44 minutes ago

asked 44 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago