# P _ 0m + DIV2 + 0m, + DIV; + 0w5 +( 1 + DIVG) “5_(1+r)1 (1+0)2 (1+:r)3 (1+r)4 (1+?

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This is the two stage dividend growth model calculation example but when I try working it out I can’t get the exact same answer. Could you please show me the full workings for the calculation part below using the given numbers? I think the example has an error either in the formula or the calculation for the last part 1/(1+r)^5 – in the calculations they didn’t add 1 to r.

Thank you

P _ 0m + DIV2 + 0m, + DIV; + 0w5 +( 1 + DIVG)“5_(1+r)1 (1+0)2 (1+:r)3 (1+r)4 (1+?)5 (1 + r)5 r — 32where DIE/’1 = D00 + 91)r = discount rate = 0.0552291 = dividend growth rate = 0.04 32 = forecast inﬂation rate = 0.025 Inputswhere DIV1 = 1.355 (from part: 4)r = 0.0552291 = 0.04-92 = 0.025Calculation P _ 1.3550 + 0.04) + DIE/1×0 + 0.04)”5 _ (1 + 0.05522)1 (1 + 0.05522)2 = 41.08453967 1 DIE/5×0 + 0.04))0.055225 0.05522 — 0.025 +—+( +

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