PRICE OF STOCK - VARIABLE GROWTH MODEL

Stock Expected Return EXPECTED RETURN COMMON STOCK INPUTS LAST DIVIDEND 1.25 $ Dollar Amount PRICE OF STOCK 45.00 $ Dollar Amount EXPECTED GROWTH RATE 9.00% Decimal OUTPUT EXPECTED RETURN 11.8% 0% 11.8% 1% 3.8% 2% 4.8% 3% 5.8% 4% 6.8% 5% 7.8% 6% 8.8% 7% 9.8% 8% 10.8% 9% 11.8% 10% 12.8% 11% 13.8% 12% 14.8% 10.0% 15.0% 20.0% 25.0% EXPECTED RETURN EXPECTED RETURNS AT DIFFERENT GROWTH RATES 13% 15.8% 14% 16.8% 15% 17.8% 16% 18.8% 17% 19.8% 18% 20.8% 19% 21.8% 20% 22.8% 0.0% 5.0% 0% 5% 10% 15% 20% 25% GROWTH RATEStock Price -Zero Growth PRICE OF COMMON STOCK -ZERO GROWTH MODEL INPUTS LAST DIVIDEND 3.00 $ Dollar Amount EXPECTED RETURN (ROR) 6.00% Decimal OUTPUT PRICE OF STOCK 50.00 $ Stock Price -Constant Growth PRICE OF COMMON STOCK -CONSTANT GROWTH MODEL INPUTS LAST DIVIDEND 1.17 $ Dollar Amount EXPECTED RETURN (ROR (k) 13.60% Decimal GROWTH RATE (g) 8.10% Decimal k must > g OUTPUT PRICE OF STOCK 23.00 $ 9% 21.27 $ 10% 61.58 $ 11% 40.34 $ 12% 30.00 $ 13% 23.88 $ 14% 19.83 $ 15% 16.96 $ $60.00 $70.00 STOCK PRICE AT DIFFERENT RORs 16% 14.81 $ 17% 13.15 $ 18% 11.82 $ 19% 10.73 $ 20% 9.83 $ 21% 9.07 $ $-$10.00 $20.00 $30.00 $40.00 $50.00 5% 7% 9% 11% 13% 15% 17% 19% 21% STOCK PRICE REQUIRED RATE OF RETURNStock Price -Variable Growth PRICE OF STOCK -VARIABLE GROWTH MODEL INPUTS LAST YEAR (e.g., 1996) 1996 1997 1998 1999 2000 2001 LAST DIVIDEND 1.17 $ GROWTH RATE (g) 30.00% 30.00% 30.00% 8.10% 8.10% Decimal EXPECTED RETURN (ROR) (k) 13.60% Decimal OUTPUT DIVIDENDS 1.52 $ 1.98 $ 2.57 $ 2.78 $ 3.00 $ PRICE 54.61 $ CASH FLOWS 1.52 $ 1.98 $ 2.57 $ 57.39 $ PRESENT VALUE $39.09 9% $39.09 10% 114.83 $ 11% 74.92 $ 12% 55.48 $ 13% 43.98 $ 14% 36.38 $ 15% 30.99 $ 16% 26.96 $ 17% 23.84 $ 18% 21.36 $ 19% 19.33 $ 20% 17.64 $ 21% 16.22 $ $-$20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 6% 11% 16% 21% PRICE OF STOCK REQUIRED RATE OF RETURN STOCK PRICE AT DIFFERENT RORs