00:01
Once again, welcome to new problem.
00:03
This time we're talking about businesses that pay businesses that pay dividends.
00:13
And what happens is if you have corporate businesses, corporate businesses that are profitable, if you have profitable corporate business, the board of the directors through management, the board of directors through management, declares dividend payments, declares dividend payments to the shareholders, declares dividend payments to the shareholders.
01:15
And each shareholder, each shareholder is an investor.
01:38
Each shareholder is an investor.
01:42
And so the payments are based off of growth.
01:53
The payments are based off of growth.
01:58
So what's going to happen, think about an enterprise.
02:01
Think about an enterprise that has dividend payments of two dollars and its growth projections if its growth projections happen to be 20 % for two years for two years, 20 % for two years after which the growth will be at a constant rate of beyond the two years.
03:17
And just to remember the initial projections of 20 % is based on growth that's non -constant.
03:26
So you have two types of growth.
03:28
One type of growth is non -constant, and then the other one is constant.
03:33
Non -constant at 20 % constant at 5%.
03:39
So those are the options you do have.
03:43
The return on investment for this fund happens to be 10%.
04:00
It happens to be 10%.
04:02
So that's what we're looking for.
04:03
There are three requirements to this problem.
04:08
Determine the point of horizon, horizon date, or the point of the horizon date.
04:23
We want to say that.
04:24
And then in part b, determine the business's horizon horizon.
04:46
Or continuing value, horizon or continuing value.
04:53
And then the other thing you wanna look at determine p not the farm's intrinsic value.
05:08
So we wanna look at also the intrinsic value.
05:11
So these are the things we're looking at in part a.
05:17
We're gonna say the horizon, date or the terminal date as you're calling it the horizon date or the terminal date happens when growth when growth becomes constant it happens when the growth becomes constant and so in conclusion we can say this is after two years after two years of non -constant growth after two years of non -constant growth and then in part b we're saying what's the horizon or continuing value remember the dividend payment was two dollars two year initial initial two -year growth rate the initial two -year growth rate is 20 percent the constant, the initial two years, non -constant growth rate is 20%.
06:49
The constant growth rate, the constant growth rate, which we call in g, is 5%.
07:00
And that happens after two years...