Bretton, inc., just paid a dividend of $3.05 on its stock. the growth rate in dividends is expected to be a constant 5 percent per year, indefinitely. investors require a return of 12 percent on the stock for the first three years, a rate of return of 10 percent for the next three years, and then a return of 8 percent thereafter. what is the current share price for the stock? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

The current share price of the stock: $91.12.

Explanation:

Current share price is equal to the total net present value of the following dividend streams:

The first dividend stream from Y1 to Y3 as followed: Y1: 3.05 x 1.05 = 3.2025; Y2 = $3.3626; Y3 = 3.5308 => Present value of the first dividend stream = 3.2025/1.12 + 3.3626/1.12^2 + 3.5308/1.12^3 = $8.0532.

The second dividend stream fro Y4 to Y6 is : Y4 = 3.3326 x 1.05 = 3.4992; Y5 3.4992 x 1.05 = 3.6742; Y6 = 3.6742 x 1.05 = 3.8579 => Present value of the second dividend stream = 3.4992/1.1^4 + 3.6742/1.1^5 + 3.8579/1.1^6 = $6.8491.

The last dividend stream Y7: 4.0508 and grow 5% each year to the indefinite => Present value is [4.0508/(8% - 5%)]/1.1^6 = $76.219.

=> Current share price = 76.219 + 6.8491 + 8.0532 = $91.12 ( round to two decimal places).

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.