Two-stage growth model

E0 $1.41
D0 $15.00
g1 4.48% Table of
Number of years in period 1 10.0 potential IVs
g2 3.00%
b 0.15 -$1,047.011
rf 0.00% Length of 5.0
Market risk premium (rM - rf) 8.53% period 1 10.0
(years) 15.0
k 1.28% 20.0
[(1+g1)/(1+k)] 1.03160 25.0
Present value (PV) of annuity with growth 11.40285 30.0
35.0
PV of dividends in period 1 $178.705 40.0
PV of dividends in period 2 -$1,225.716
Intrinsic value (IV) -$1,047.011 Table of
potential P/E1 ratios
Growth opportunities
No-growth value $110.199 -710.7206
PVGO -$1,157.210 Length of 5.0
period 1 10.0
P/E ratios (years) 15.0
P/E0 -742.5609 20.0
P/E1 -710.7206 25.0
30.0
35.0
40.0
 DENOTATIONS:
Input values
Calculated values

g1
10.00% 11.00% 12.00% 13.00% 14.00%
33.476 34.855 36.281 37.756 39.281
35.574 38.204 41.033 44.075 47.345
37.253 41.010 45.197 49.864 55.064
38.598 43.361 48.846 55.166 62.453
39.674 45.330 52.042 60.023 69.527
40.536 46.980 54.843 64.473 76.298
41.227 48.362 57.298 68.548 82.780
41.779 49.520 59.448 72.281 88.985

ential P/E1 ratios

g1
10.00% 11.00% 12.00% 13.00% 14.00%
7.6083 7.8502 8.0984 8.3531 8.6142
8.0849 8.6045 9.1592 9.7511 10.3826
8.4666 9.2365 10.0887 11.0318 12.0754
8.7722 9.7659 10.9031 12.2049 13.6958
9.0169 10.2095 11.6166 13.2795 15.2471
9.2128 10.5811 12.2418 14.2638 16.7320
9.3697 10.8924 12.7897 15.1655 18.1535
9.4953 11.1532 13.2696 15.9914 19.5143
 ROE = Profit/equity
g1 = ROE1 x b
g2 = ROE2 x b
d= DPS/EPS
1= d+b
b= 1-d
dividend per share 15
ROE1 = 0.07
d= 0.36
b= 0.64
g1 = 0.0448