Question

At the end of the year 2016 Brown Bear Corporation paid dividends $2.82 per share. The company projects the following annual growth rates in dividends:

Year Growth Rate

2017 13%

2018 13%

2019 13%

2020 9%

2021 9%

2022 4%

From year 2023 onward growth in dividends is expected to remain constant at 3% per year. The required rate of return for this stock is 9.52%. Calculate the economic value of the stock now (end of the Year 2016).

Answer 1

	2016	2017	2018	2019	2020	2021	2022	2023 onwards till perpetuity
Growth rate of dividend		13%	13%	13%	9%	9%	4%	3%
Dividend per Share		3.19	3.60	4.07	4.44	4.83	5.03
Terminal Value of Stable Growth Dividends							77.11222
PV of Stable growth	44.68508
PV of High Growth Dividend	$18.07
Total Value of share	$62.76	Required Answer
	Indicates period of high growth dividend
	Indicates period of stable growth dividend