Nonconstant Growth: Strico Co. just paid div. of $3.50/share

[barn]

Still lost with this issue!!!!!!

Strico Co. just paid a dividend of $3.50 per share. The company will increase its dividends by 20% next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5% dividend growth , after which the company will keep a constant growth rate, forever. If the required return on the Storico stock is 13%, what will a share of stock sell for today??

 

[tkhunny]

This is a great spreadsheet problem. Let's see how long it takes...

Start: 2:06 PM EST

Growth Model Set Up: 2:08 PM EST

Discount Model Set Up: 2:10 PM EST

Reread the Problem and Check the Model: 2:13 PM EST

Spreadsheet Errors Repaired and Consistent Result Obtained: 2:15 PM EST

I get $63.01. These are not difficult. They are only tedious. Spreadsheets LOVE tedium.