920 Nonconstant growth followed by constant growth 0 2 3 4 g

9-20 Nonconstant growth followed by constant growth: 0 2 3 4 g = 30% g = 30% g = 30% 3.380 Do = 2.00 1 2.301 2.647 3.045 46.116 2.600 4.394 [4.658) 01 4.658 = $66.54 0.13-0.06 54.109 = Po Copyright 2001 by Harcourt, Inc. All rights reserved.

Solution

For constant growth P3 is calculate as 66.54 $ above in the figure.

In order to discount the cash flow to present value = CF/(1+rate)ⁿ= 66.54/1.13³ = 46.116 $