## Transcribed Text

1
CF1
= n =
g = gs
=
k = Pactual
a. What is the sum of the PVs of the first n cash Flows?
b. What is the future value of the perpetuity value?
c. What is the estimated value of the price of the stock? Set Cell
d. To Value
By Changing
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2
a.
b. 9,50%
PV(CF1-n) FVperpetuity PEstimate
3 In a single XY Scatter Chart, Graph the data table you just created.
- Your chart should be properly labelled.
- Use a secondary axis for the PV(CF1-n)
Given the following data, construct a table of cash flows assuming
that you would sell the stock at the end of year n (just after the last
dividend payment). It is assumed that the stock cash flow (dividend)
will grow at g s
until the end of period n , then grow at g forever
afterward.
Goal Seek
What value would k have to be in order for your
model compute the estimated price to equal the value
in cell P actual (E10)?
Using Excel's Data Table function, construct a single Data Table that
computes the
i) The sum of the present value of the cash flows (1-n ), PV(CF1-n)
ii) the Future Value of the Perpetuity at the end, and
iii) the stock price estimate,
all as a function the discount rate, k , as it changes from 7% to 14%
in 1/4% increments.
Enter the value in the cell for the value of the FV of the
perpetuity at 010%.

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