Oviedo Paper Valuation (Example of Two-Stage Growth Model)

OVIEDO Paper, Inc. is a major producer of paper products. Due to its immensely popular new stationery product, an
expect that the firm's earnings and dividends will grow at a rate of 15% per year for the next five years.
After that, analysts expect that the firm's growth rate will decline to its historial value of 8% per year as competitors l
similar products.
If Oviedo Paper recently paid a dividend (D0) of $0.35 and your required return is 12%, what is the value of the stoc
today?

Two-Stage Growth Rate DDM

D0
N
G1
G2
Kcs

Stage 1

Stage 2

VCS

Year

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 0.35 D0 ='Oviedo Paper Valuation'!$B$11
5 G1_ ='Oviedo Paper Valuation'!$B$13
15% G2_ ='Oviedo Paper Valuation'!$B$14
8% Kcs ='Oviedo Paper Valuation'!$B$15
12% N ='Oviedo Paper Valuation'!$B$12

Numerator -0.05687
Denominator -0.03
v1 1.895749

Numerator 0.431411
Denominator 0.04
v1 10.78527

12.6810162019

0.4025 VCS $12.63

0.462875
0.53230625
0.6121521875
0.70397501563
0.76029301688
0.82111645823
0.88680577488
0.95775023687
1.03437025582
1.11711987629
1.20648946639
1.3030086237
1.4072493136
1.51982925869
1.64141559938

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 1.77272884733
1.91454715512
2.06771092753
2.23312780173
2.41177802587
2.60472026794
2.81309788938
3.03814572053
3.28119737817
3.54369316842
3.8271886219
4.13336371165
4.46403280858
4.82115543327
5.20684786793
5.62339569736
6.07326735315
6.5591287414
7.08385904071
7.65056776397
8.26261318509
8.9236222399
9.63751201909
10.4085129806
11.2411940191
12.1404895406
13.1117287038
14.1606670001
15.2935203602
16.517001989
17.8383621481
19.2654311199
20.8066656095
22.4711988583
24.268894767
26.2104063483
28.3072388562
30.5718179647
33.0175634018
35.658968474
38.5116859519
41.5926208281
44.9200304943
48.5136329338
52.3947235686
56.586301454
61.1132055704
66.002262016
71.2824429773
76.9850384155

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 83.1438414887
89.7953488078
96.9789767124
104.737294849
113.116278437
122.165580712
131.938827169
142.493933343
153.89344801
166.204923851
179.501317759
193.86142318
209.370337034
226.119963997
244.209561117
263.746326006
284.846032087
307.633714654
332.244411826
358.823964772
387.529881954
418.53227251
452.014854311
488.176042656
527.230126068
569.408536154
614.961219046
664.15811657
717.290765895
774.674027167
836.64794934
903.579785287
975.86616811
1053.93546156
1138.25029848
1229.31032236
1327.65514815
1433.86756
1548.5769648
1672.46312199
1806.26017175
1950.76098549
2106.82186433
2275.36761347
2457.39702255
2653.98878435
2866.3078871
3095.61251807
3343.26151952
3610.72244108

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 3899.58023636
4211.54665527
4548.47038769
4912.34801871
5305.33586021
5729.76272902
6188.14374735
6683.19524713
7217.8508669
7795.27893626
8418.90125116
9092.41335125
9819.80641935
10605.3909329
11453.8222075
12370.1279841
13359.7382229
14428.5172807
15582.7986631
16829.4225562
18175.7763607
19629.8384696
21200.2255471
22896.2435909
24727.9430782
26706.1785244
28842.6728064
31150.0866309
33642.0935613
36333.4610462
39240.1379299
42379.3489643
45769.6968815
49431.272632

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