Problem 7-28 nonconstant growth (lo2) planned obsolescence has a product that will be in vogue for 3 years, at which point the firm will close up shop and liquidate the assets. as a result, forecast dividends are div1 = $12.00, div 2 = $12.50, and div 3 = $28.00. what is the stock price if the discount rate is 10%? (do not round intermediate calculations. round your answer to 2 decimal places.) stock price

Po = D1        +     D2    +         D3

       (1 + Ke)     (1 + Ke)2   (1 + Ke)3                                                                                                                                          

Po = $12 +   $12.50 +      $28

     (1 + 0.1)    (1 + 0.1)2   (1 + 0.1)3

Po = $12 + $12.50 + $28

        1.1       (1.1)2        (1.1)3

Po = $10.91 + $10.33 + $21.04

Po = $42.28  

Explanation:                                                                      

The current stock price is a function of future dividends capitalised at the cost of capital of the company of 10% for a period of 3 years.  

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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