CFIN6
Chapter 7 Spreadsheet Problem
Stock Valuation
Use the model in File C07 to solve this problem.
1. Microweb Company has never paid a dividend. But, this year the company expects to pay a
dividend equal to $2.50 per share, and it plans to continue paying this same dividend for the
2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200 percent more
electricity than any solar panel currently on the market. As a result, Ultimate is expected to
experience a 15 percent annual growth rate for the next five years. When the five-year period ends,
a. Calculate the value of the stock today.
b. Calculate the dividend yield,
1
ˆ
D
/P0, the expected capital gains yield, and the expected total
return (dividend yield plus capital gains yield) for this year. Calculate these same three yields
for Year 5.
