Cannot attach file for some reason. Not good at Finance at all! Need help and need to show work. Please and Thank You!
Question 1: Fasco Industries just paid a dividend of D0 = $1.45. Analysts expect the company\'s dividend to grow by 28% this year, by 11% in Year 2, and at a constant rate of 6% in Year 3 and thereafter. The required return on this low-risk stock is 11.00%. What is the best estimate of the stock’s current market value?

Question 2: Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.

Po = D1/(r - g)
To do that we will have to estimate the vales of r, g, and D1.
To estimate the value of r we will use the Capital Asset Pricing Model:
CAPM = Rf + Beta(Rm - Rf)
Where:
Risk Free Rate = Rf = 3.5%
Market Return = Rm = 12%
Beta of BA 217 Corp. = .85

Question 3: Calculate \"r\".
Next we estimate the value of \"g\" using the average growth rate of past dividends.
Assume 6 years ago AB 217 paid a dividend of $1.20 and this year they paid a dividend
of $1.55, using the Excel RATE formula calculate the average growth rate it took for the
dividend to the current level in the period of time.

Question 4: Calculate \"g\".
Next we estimate the value of D1, the dividend next year as required by the Constant
Growth Model.
D1 = Do(1 + g), where Do = the dividend today, $1.55
Unit

Question 5: Calculate \"D1\".
Using your solutions estimate the value of AB 217 Corporation\'s stock using the
Constant Growth Model.
Po = D1/(r - g)

Question 6: Calculate the estimated value or Price Today of AB 217 = \"Po\".
Finally comment on this question. If the actual market value was BELOW your
estimated value of AB217, and you were highly confident in your assumptions, what
action might you take?