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F. Naz
F. Naz, B.Com
Category: Multiple Problems
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Experience:  have completed B.Com and CA Finalist
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2. You are an analyst studying Beranek Technologies, which

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2. You are an analyst studying Beranek Technologies, which was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.50 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Your forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of Beranek's current intrinsic value?
Year 0 1 2 3 4 5 6 7
Growth rate NA NA NA NA 50.00% 25.00% 8.00% 8.00%
Dividend $0.00 $0.00 $0.00 $0.50 $0.75 $0.94 $1.01 $1.09
Zero current div, non-constant then constant growth
Required return 11%
Submitted: 1 year ago.
Category: Multiple Problems
Expert:  F. Naz replied 1 year ago.

Your answer is at above link, please download the file and then view answer, do not see the answer in view mode, thanks.