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Inga [223]
3 years ago
6

Hart enterprises recently paid a dividend, d0, of $1.25. it expects to have nonconstant growth of 20% for 2 years followed by a

constant rate of 5% thereafter. the firm's required return is 10%.
a. how far away is the terminal, or horizon, date?
Business
1 answer:
zepelin [54]3 years ago
8 0

Answer:

Explanation:

Terminal or horizon date is a point in time where a company's dividend experiences a constant growth rate.

In this case, it is mentioned that non-constant growth rate of 20% will happen for first two years and thereafter, a constant rate of 5%; this means that

D1= 1.25(1.20) =1.5

D2 = 1.5 (1.20)= 1.8

Then starting at D3, there's a constant growth rate = 5% so,

D3 = 1.8 (1.05)= 1.89

D4 = 1.89(1.05)= 1.9845

D5 = 1.9845 (1.05) = 2.0837

.....and so on

Therefore, the horizon date would be at the end of the second year i.e. End of Year 2.

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Answer:

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3 0
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3 years ago
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Evgesh-ka [11]

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Net income                                                                              $442,000

Salary

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Interest

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left amount  $192,650 $192,650  $385,300                        $0

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