Overview
Spreadsheet Exercise (please complee this assignment using Excel)
Ope Corporation is a publicly traded firm based out of Emporia, Kansas. You are interested in purchasing their common stock. The firm recently paid a dividend of $5 per share. It expects its earnings—and hence its dividends to grow at a rate of 7% for the foreseeable future. Currently, similar-risk stocks have required returns of 10%.
To Do
- Given the data above, calculate the present value of this security. Use the constant growth model to find the stock value.
- One year later, your broker offers to sell you additional shares of Ope at $90. The most recent dividend paid was $5.21, and the expected growth rate for earnings remains at 7%. If you determine that the appropriate risk premium is 6.74% and observe that the risk-free rate, RF, is currently 5.25%, what is the firm’s current required return for Ope?
- Determine the value of the stock using the new dividend and required return from part b.
- Given your calculation in part c, would you buy the additional shares from your broker at $98 per share? Explain.
- Given your calculation in part c, would you sell your old shares for $ $98? Explain.
Show all your calculations for full credit. Please show work with excel use formulas do not hard type answers PLEASE