1) Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $2.15, what is the current share price

P0 = $60.23475 rounded off to $60.23

Explanation:

To calculate the market price of the stock today, we will use the two stage growth model of DDM. The two stage growth model calculates the values of the stock today based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +  [(D0 * (1+g1)^n * (1+g2))  /  (r - g2)] / (1+r)^n

Where,

P0 = 2.15 * (1+0.30) / (1+0.11)  +  2.15 * (1+0.30)^2 / (1+0.11)^2  +  

2.15 * (1+0.30)^3 / (1+0.11)^3  +  [(2.15 * (1+0.30)^3 * (1+0.04)) / (0.11 - 0.04)] / (1+0.11)^3

P0 = $60.23475 rounded off to $60.23

the page presents four different kinds of threats that volcanoes pose and what to do before, during, and after an eruption.