FIN 534 RANK Imagine Your Future / FIN 534 RANK Imagine Your Future / - Page 68

share. Sally asked a number of security analysts what they believe FCE's future dividends will be, based on their analysis of the company. The consensus is that the dividend will be increased by 10% during Years 1 to 3, and it will be increased at a rate of 5% per year in Year 4 and thereafter. Sally asked you to use that information to estimate the required rate of return on the stock, rs, and she provided you with the following template for use in the analysis. Sally told you that the growth rates in the template were just put in as a trial, and that you must replace them with the analysts' forecasted rates to get the correct forecasted dividends and then the estimated TV. She also notes that the estimated value for rs, at the top of the template, is also just a guess, and you must replace it with a value that will cause the Calculated Price shown at the bottom to equal the Actual Market Price. She suggests that, after you have put in the correct dividends, you can manually calculate the price, using a series of guesses as to the Est FVB'2FRfVRb'2FB6W6W2FR67VFVB&6RFWVFP7GV&6R2FR6'&V7BR6RFW2FVvFBF2G&BW'& &6W72vVB&RVFRFVFW2BFBFR6'&V7B'26VB&RfV@V6f7FW"vF6RW6VFVW7V6ǒbRW6Rv6VVvB2FRfVRb'3BP""#P2"SPB"rPR23bP