What growth does a 31.40 share price assume? For the composite grower, 5.25 percent, and the MT480 Unit 4 exercise here reaches that figure through three dividend models. Searches like "mt 480 unit 4 assignment example", "mt480 unit 4 sample" and "mt480 unit 4 example" land here.
What a finished MT480 Unit 4 stock valuation exercise looks like
Four parts over about three pages, all at the 9.0 percent required return the problem supplies. Constant growth of 4.5 percent turns next year's 1.1704 dividend into a price of 26.01 dollars, well under the market. A two-stage path, 11 percent growth for three years as the new glass matures and 4.5 percent afterward, produces dividends of 1.2432, 1.3800 and 1.5317, a year-three price of 35.57 and a present value of 30.95. Solving the constant growth model for g at the market price gives 5.25 percent, which the exercise compares with sustainable growth of 5.26 percent from an 11.6 percent return on equity and a 54.63 percent payout. A preferred issue paying 5.75 percent on 25 dollars of par is worth 20.25 at a 7.1 percent required yield.
How a MT480 Unit 4 example is structured
Every part repeats one sequence: the cash flows on a timeline, the model named and written in symbols, the inputs, the price, then a sentence comparing that price with the market's 31.40. Constant growth comes first because each later part builds on it. The two-stage part lists each high-growth dividend separately, discounts them one at a time, and then discounts the terminal price from year three rather than year four, the placement most often gotten wrong. A reverse-solving part follows, rearranging the model for g and checking the answer against the grower's own retention and profitability. The preferred shares close the exercise as a perpetuity. A short final paragraph reprices the constant growth case at 8.5 and 9.5 percent, giving 29.26 and 23.41, to show how much of any share value rests on the discount rate.
Growth held steady
D1 of 1.1704 divided by the 4.5-point spread between return and growth gives 26.01, about 17 percent below the quoted price.
Three fast years
Dividends growing 11 percent through year three are discounted individually to 3.4848, and a terminal price of 35.57 supplies most of the remaining value.
Where the terminal price sits
The year-three price rests on the year-four dividend of 1.6007 but is discounted three periods, a placement the sample marks with an arrow on its timeline.
What the market assumes
Rearranged for growth, the model says a 31.40 price implies 5.25 percent a year, a rate the grower's retention and profitability can plausibly support.
A perpetuity for preferred
The 1.4375 annual preferred dividend over a 7.1 percent required yield values each share at 20.25, below its 25-dollar par.
Where marks go in MT480 Unit 4
Which dividend goes in the numerator decides more grades in this unit than any arithmetic does. Using the dividend just paid, 1.12, where next year's 1.1704 belongs lowers the constant growth price to 24.89, and the size of that gap shows the grader exactly what happened. In the two-stage part, discounting the terminal price four periods instead of three understates value by about 2.27 dollars. Growth rates at or above the required return produce negative or infinite prices that call for a sentence rather than a reported figure. Reverse-solved growth reported without a plausibility check misses the part of the rubric that rewards judgment. Comparing every model's result with the market price, and saying what the difference implies about investor expectations, is where the interpretation credit sits.
Get a MT480 Unit 4 example written to your instructions
Attach the Unit 4 exercise with its dividend figures, growth assumptions and required return, plus your rubric. Each part of a custom sample places the dividends on a timeline, names the model, and closes by comparing the computed value with the market price your problem gives. First custom sample free; expect it within 24-48h in most cases.
MT480 Unit 4 questions, answered
Why is the constant growth price so far below the market price?
Because the market expects more than 4.5 percent growth. The exercise shows that the quoted 31.40 is consistent with about 5.25 percent, and that the two-stage path, which adds three years of faster growth from new greenhouse capacity, lands within about 45 cents of the market. The gap is information about expectations rather than proof that the shares are mispriced.
What is sustainable growth and why compare it?
Sustainable growth is return on equity multiplied by the share of earnings kept in the business, here 11.6 percent times about 45 percent retained. It estimates how fast dividends can grow without new shares or added leverage. When the growth a price implies roughly matches it, as with 5.25 against 5.26 percent, the market's assumption looks attainable rather than optimistic.
Do I need the preferred stock part if my problem has none?
No. Sections vary in what they include, and a custom sample follows your problem's parts in its own order. Some add a price-earnings cross-check or a nonconstant path with more stages; the method stays the same, with dividends placed on a timeline, the terminal value located carefully and each result read against the market price.