# Calculate the value of a stock

4. Calculate the value of a stock with the following expectations for dividend payments: \$1.75 in Years 1, 2 and 3, and then annual dividend growth of 1.5% per year indefinitely. Assume a discount rate of 9%. Solve the problem two different ways: first by using the algebraic formula for the Gordon Growth Model combined with PV of uneven dividend payments, then by using Excel to calculate and sum the dividends and their respective present values for the next 150 years. hint: Use the Uneven, then Const. Growth Div example in the posted DDM Excel Examples file as a guide. Feel free to copy the worksheet and make the minor necessary changes to answer this question.

# Calculate the value of a stock

2. Calculate the value of a stock with an expected annual dividend of \$2.00 next year and an estimated annual dividend growth of 2% per year indefinitely. Assume a discount rate of 8%. Solve the problem two different ways: first by using the algebraic formula for the Gordon Growth Model, then by using Excel to calculate and sum the dividends and their respective present values for the next 150 years. hint: Use the PV ConstGrowth Dividend example in the posted DDM Excel Examples file as a guide. Feel free to copy the worksheet and make the minor necessary changes to answer this question.

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