Business valuation

The MV is the PV of future dividends discount at the shareholders required rate of return. So discount the first 3 dividends individually. For the dividends from time 4 onwards use the dividend growth model but then discount the result for 3 years because the growing dividends start 3 years late (at time 4 instead of at time 1). Please watch the lectures because I work through a similar example in the lectures and explain.

Here is my solution Year Now. Df10% Cf 1. 20c 0.909. 0.182 2 22c. 0.826 0.182 3. 25c. 0.751. 0.182 4. 25c * 1.02= 25.5. 0.683. 0.174 Until here I did after that I am not understanding. I see your lectures regarding this type of questions but that question in your lectures I find easy as constant cf is given for 2 yrs but here e are diff dividends. Can you please explain now how I should do further calculation.thanks in advance

Assuming that you have actually watched the lecture then I suggest that you watch it again, because the only 'harder' thing about this example is that you have to discount the first 3 dividends individually, which you should find trivial. Dealing with the dividends from time 4 onwards is exactly the same approach as explained in the lecture. You have discounted the first 3 dividends (but you have got year 3 wrong - 25c x 0.751 does not equal 0.182). I have no idea what you have done for time 4 onwards. The dividend carries on after time 4, inflating at 2% per year and you are supposed to use the growth model formula just as I do in the lecture. Do is 25c, g is 2%, and r is 10%. As I wrote before, the answer from the formula is the PV in 3 years time and so needs discounting for 3 years. Then you simply add up all the PV's to get the market value.