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1. Turbo Technology Computers is experiencing a period of rapid growth. Earnings and

dividends are expected to grow at a rate of 15% during next two years, at 13% in the

third, and at a constant rate of 6% thereafter. Turbo’s last dividend was $1.15 and

required rate or return on the stock is 12%.

a. Calculate the value of the stock today.

D1 = D0 (1 + gl)

 = $1.15 (1 + 0.06)

 = $1.22

P

^

0 = D1/ (rs – gl)

 = 1.22/ (.15 - .06)

= $13.56

b. Calculate P1

^

 and P2

^

.

P1

^

 ...
FIN 550FIN 550 Assignment 3.1/FIN 550: Corporate Financial Management Bartequa Blackmon Module 3 Assignment
Last document update:
ago
1. Turbo Technology Computers is experiencing a period of rapid growth. Earnings and

dividends are expected to grow at a rate of 15% during next two years, at 13% in the

third, and at a constant rate of 6% thereafter. Turbo’s last dividend was $1.15 and

required rate or return on the stock is 12%.

a. Calculate the value of the stock today.

D1 = D0 (1 + gl)

 = $1.15 (1 + 0.06)

 = $1.22

P

^

0 = D1/ (rs – gl)

 = 1.22/ (.15 - .06)

= $13.56

b. Calculate P1

^

 and P2

^

.

P1

^

 ...
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