FCF 9th Edition Chapter 08

8/13/2019 FCF 9th Edition Chapter 08

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Chapter 8Problems 1-24

Input boxes in tan

Output boxes in yellow

Given data in blue

Calculations in red

Answers in green

NOTE: Some functions used in these spreadsheets may require tha

the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.To install these, click on the Office button

then "Excel Options," "Add-Ins" and select

"Go." Check "Analyis ToolPak" and

"Solver Add-In," then click "OK."


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Chapter 8Question 1

Input area:

Dividend paid 1.95$Dividend growth rate 6%Required return 11%# of years 15

Output area:

Price 99.07$


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Chapter 8Question 2

Input area:

Dividend paid 2.10$Dividend growth rate 5%Stock price 48.00$

Output area:

Required return 9.38%


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Chapter 8Question 3

Input area:

Dividend paid 2.10$Dividend growth rate 5%Required return 48.00$

Output area:

Dividend yield 4.38%

Capital gains yield 5.00%


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Chapter 8Question 4

Input area:

Dividend paid 3.04$Dividend growth rate 3.80%Required return 11%

Output area:

Price 42.22$


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Chapter 8Question 5

Input area:

Dividend growth rate 5.2%Required return 6.3%

Output area:



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Chapter 8Question 6

Input area:

Stock price 47.00$Required return 11.0%

Output area:

Next year's dividend 2.59$

Current dividend 2.45$


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Chapter 8Question 7

Input area:

Current dividend 9.75$Years until dividend ceases 11Required return 10.0%

Output area:

Share price 63.33$


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Chapter 8Question 8

Input area:

Current dividend 5.50$Share price 108.00$

Output area:



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Chapter 8Question 9

Input area:

Dividend paid 2.35$Dividend growth rate 5%Red required return 8%Yellow required return 11%Blue required return 14%

Output area:

Red price 78.33$

Yellow price 39.17$

Blue price 26.11$


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Chapter 8Question 10

Input area:

Dividend paid 3.50$Dividend growth rate 5.0%

Required return for first 3 years 14%Required return for second 3 years 12%Final required return 10%

Output area:

Stock price at beginning of final period 98.50$Stock price at beginning of second period 80.81

Current stock price 63.47$


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Input area:

Future dividend 10.00$Years until first dividend 10Dividend growth rate 5%Required return 14%

Output area:

Stock price at constant growth 111.11$

Share price 34.17$


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Input area:

Dividend 6.00$Dividend growth rate 4.00$Years of growth 5Required return 11%

Output area:

Year Dividend1 10.00$2 14.003 18.004 22.005 26.006 -7 -8 -9 -

10 -

Share price 63.45$


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Input area:

Dividend one 11.00$Dividend two 8.00$Dividend three 5.00$Dividend four 2.00$Dividend growth rate 5%Required return 12%

Output area:

Price after Year 4 dividend 30.00$

Share price 40.09$


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Input area:

Dividend growth rate - period 1 30%Dividend growth rate - period 2 6%Required return 13%Dividend 1.80$

Output area:

Price at end of supernormal growth 59.88$

Share price 48.70$


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Input area:

Share price 76.00$Required return 13%

Initial dividend growth rate 25%Second growth rate 15%Final growth rate 8%

Initial # of years 3Second # of years 1

Output area:

P4 48.52 X D0

Share price 34.79 X D0


Next year's dividend 2.73$


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Input area:

Dividend paid 10.46$Dividend growth rate -4%Required return 11.50%

Output area:

Price 64.78$


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Input area:

Stock price 64.00$Required return 10%Dividend growth rate 4.50%

Output area:



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Input area:

Current dividend 20.00$Years until dividend begins 20Required return 6.4%

Output area:

Share price one year before

first dividend 312.50$

Share price 96.15$


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Input area:

Dividend yield 2.10%Dividend paid 1.48$Change in price (0.23)P/E ratio 19Commons shares outstanding 25,000,000

Output area:

Today's closing price 70.48$

Yesterday's closing price 70.71$

Earnings per share 3.71$

Net income 92,731,830$


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Input Area:

Dividend per share 1.25$Initial growth rate 28%Terminal growth rate 6%# of years 8Required return 13%

Output Area:

Stock price 69.55$


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Input Area:

Initial growth rate 25%# of years 11Terminal growth rate 6%Required return 12%Dividend per share 1.74$

Output Area:

Stock price 142.14$


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Input area:

Required return 19%Most recent dividend 4.50$

Stock W dividend growth rate 10%Stock X dividend growth rate 0%Stock Y dividend growth rate -5%

Stock Z:

Initial growth rate 20%

Initial # of years 2Final growth rate 12%

Output area:

Dividend yields:

Stock W price 55.00$Dividend yield 9%

Capital gains yield 10%

Stock X price 23.68$Dividend yield 19%

Capital gains yield 0%

Stock Y price 17.81$Dividend yield 24%

Capital gains yield -5%

Stock Z price at final rate 103.68$

Stock Z current price 82.33$Dividend yield 6.6%

Capital gains yield 12.4%

In all cases, the required return is 19%, but this return is distributed


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differently between current income and capital gains. High growthstocks have an appreciable capital gains component but arelatively small current income yield; conversely, mature, negative-growth stocks provide a high current income but also pricedepreciation over time.


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Input area:

Dividend paid 3.20$Dividend growth rate 6%Required return 12%

# of dividends per year 4

Output area:

a. Price 56.53$

b. Next four dividends 0.8480$Effective quarterly rate 2.87%Effective first dividend 3.54$

Share price 59.02$


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Chapter 8Questions 24, 25

Input area:

Required return 11.00%Most recent dividend 2.45$

Year 1 dividend growth rate 20%Year 2 dividend growth rate 15%Year 3 dividend growth rate 10%Year 4 dividend growth rate 5%

Output area:

Share price after Year 3 dividend 65.08$

Share price 55.70$

To solve problem #24, adjust the required return untilthe share price is equal to $63.82. Alternatively, you coulduse the "Solver" or "Goal Seek" functions.

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FCF 9th Edition Chapter 08