问题

问题如下：

Using Exhibit 1 and Jackson’s selected model for the high growth stock, the value is closest to:

选项：

A.$29.00. B.$30.00. C.$32.00.

解释：

Solution

A is correct. Using the H-model, the value is $29,00 calculated as follows:

DO(1+gL)r−gL+DOH(gS−gL)r−gL$\frac{D_O\left(1+g_L\right)}{r-g_L}+\frac{D_{O}H\left(g_S-g_L\right)}{r-g_L}$

Where:

D₀ = the current dividend: $2.00

g_L = the long-term growth rate: 4%

g_S = the short-term growth rate: 8%

H = the half-life of the high growth period: 6/2 = 3

2.00(1+gL)0.12−.04+2.00×3(.08−.04)0.12−.04$\frac{2.00\left(1+g_L\right)}{0.12-.04}+\frac{2.00\times 3\left(.08-.04\right)}{0.12-.04}$

= $26.00 +3.00 = $29.00

B is incorrect. It grows the dividend in the first term by the higher growth rate 8% not 4% making the first term $27.00 and the total = $27.00 + 3.00 = $30.00

C is incorrect. It uses the full six years not the half-life value for H; therefore, the second term = $6.00 and the total = $26.00 + 6 = $32.00