Holt Enterprises recently paid a dividend, D0, of
$3.25. It expects to have nonconstant growth of 15% for 2 years
followed by a constant rate of 5% thereafter. The firm's required
return is 9%.
- 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 dividends
at time zero.
- 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 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.
-Select-IIIIIIIVVItem 1
- What is the firm's horizon, or continuing, value? Round your
answer to two decimal places. Do not round your intermediate
calculations.
$
- What is the firm's intrinsic value
today, P̂0? Round your answer to two
decimal places. Do not round your intermediate calculations.
$