> 1/1.103^5 + 1.25/1.103^6 + (1.5625+36.85)/1.103^7 = 20.65 Unless my math is really bad, the sum above is $20.90. If you do it this way, you will have to pick the wrong answer (B).
Its bad 
I probably didn’t write the order of operations 100% correct so maybe that’s what tripped you up. 1/(1.103^5) + 1.25/(1.103^6) + (1.5625+36.85)/(1.103^7) = 20.65
You’re right… I think I entered $38.65 in your formula. All well, as long as it works.
OK im NOT getting this correct here CF0 - 0 CF1 - 0 CF2 - 0 CF3 - 0 CF4 - 0 CF5 - 1 CF6 - 1.25 CF7 - 1.562 CF8 - 1.93 CF9 - 2.05 + 38.68 NPV = 20.50 Where am I going wrong here?
CF9 occurs at CF8, not at 9th period, with stock price added to the 1.25^3 dividend
Nice way to use the calculator Mr Map! I didnt though about that! 
got it, so you wouldnt need to include the extra 5% growth Thanks Map
CF8 = 1.953125 + 1.953125 * 1.05 / (.103 - 0.05). CF9 --> is 2.0507 Discount it back at (r -g) = (.103 - .05) to get the add on to CF8 then do not consider the CF9 in your cash flow calculation. Another short cut to remember on the TI BA II Plus Calc. CF0 = 0 CF1 = 0, F1 = 4 (Frequency=4 “Zero” cash flows) CF2 = 1 F2 = 1 CF3 = 1.25 F3=1 and so on CP
SirViper where did you get the 36.85 from?
my guess is from using the infinite-period dividend discount model
38.68 is the number to be used. Period 9: CF = 1.951325 * 1.05 (Growth factor of 5%) This discounted back by the uniform growth rate becomes 1.951325 * 1.05 / (.103 - .05) = 38.68 at Period 8. CP
Good problem. I did come up with A as well. Took me maybe a little bit more than 1.5 minutes, though. The time line thing definetly helps.
hi- I have a quick question…don’t we need to find D9? bc/ dividen grows at a constant rate after year 8 right? so P8=D9/k-g ?
aegean --> that is exactly the 38.68 number above. CP