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Please see attachments. Thank you. Document Preview: 7/22/2012 1.6 0.1 0.2 0.05 0.2 0.05 0 1 2 3 1.6 0.1 0.2 0.06 0.2 0.06 0 1 2 3 4 5 6 7/22/2012 b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect its price, dividend yield, and capital gains yield? c. What will TTC's dividend yield and capital gains yield be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth, and the calculations are very easy.) We used the 5-year supernormal growth scenario for this calculation, but ultimately it does not matter which example you use, as they both yield the same result. D n+1 P n = D 3 = D 6 Horizon value = P 5 = Except for charts and answers that must be written, only Excel formulas that use cell references or functions will be accepted for credit. Numeric answers in cells will not be accepted. Chapter 7. Ch 07 P20 Build a Model a. If D 0 = $1.60, r s = 10%, and g n = 5%, what is TTC's stock worth today? What are its expected dividend yield and capital gains yield at this time? Spring 1, 2013 = + / Year Dividend PV of dividends g L g S Short-run g
for Years 1-2 only. Long-run g
for Year 3 and all following years. Part 2. Finding the expected dividend yield. Dividend yield = Part 3. Finding the expected capital gains yield. Cap. Gain yield= Expected return Dividend yield Short-run g
for Years 1-5 only. Long-run g
for Year 6 and all following years. 1. Find the price today. = Terminal value = P 2 = = P 0 2. Find the expected dividend yield. 3. Find the expected capital gains yield. P 0 1. Find the price today. Recall that the expected dividend yield is equal to the next expected annual dividend divided by the price at the beginning of the period. The capital gains yield can be calculated by simply subtracting the dividend yield from the total expected return. Upon reflection, we see that these... Attachments: tool_kit.xlsx p20_build_a_m....xlsx 6_problems.pdf Feb 28 2014 02:43 PM


Solution ID:609070 | This paper was updated on 26-Nov-2015

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