[Anonymous]

for those of you that have Becker, I’m referring to page B3-75 to the two examples on the top of the page…

first example asks what you’d pay for stock in one year, when the dividend is $5 per year and projected constant growth of 4% per year. you have a required return of 20%.

The formula is: Div. sub (t+1) / (Req. Ret. – Growth)

So for the numerator they did $5 * 1.04 which makes sense to me (since that’s the dividend assuming 1 year’s worth of growth)

what gets me is the second example below it, all the same facts except it’s asking for what you’d pay in 3 years.

here, the numerator they end up doing $5 * 1.04 ^ 4

I don’t understand why they’re doing it to the 4th power? I would think it would be 3?

[pinkpink114]

There is a corrected page in the BECKER updates for that problem

[Anonymous]

damn you becker! I was staring at that page for at least 30 min trying to figure out what I was doing wrong. thank you so much for that.

[Author]

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