The first step in doing the dividend discount model is to pull in the dividends that we calculated previously from the calculation section of the model. So I'm gonna go up and get the dividend number. Now, in this bank, it's a fast growing bank, so we actually had a capital contribution initially, so I'm gonna take that and I'm gonna reverse the sign by multiplying it by minus one because this is to the investor. In the initial years, the investor's having to make a payment into the business and then eventually they can take dividends out. The next thing is to do the Gordon growth Model Terminal Value and I'm gonna do that in the final year. And if I do that in the final year, what I need to do is I need to grow that last year out one year, assuming I want to put the terminal value in my column J. So I'm gonna get the 134.5, and I'll multiply that by one plus the long-term growth rate and I'm gonna go up to my assumptions for the long-term growth rate, which is the assumption of 2% a year and then what I'm going to do is divide that by open parenthesis, in this case, the cost of equity, and I'm using the capital asset pricing model above, minus the long-term growth rate and that will give me my terminal value number. Now I'm going to check that by calculating an implied LTMPE multiple. Now because that value is in the middle of the year, what I should do is I should take the value and then just move it out half a year, so it represents value at the end of the earnings period. So I'm gonna multiply that by open parenthesis one plus and I'm gonna go and get the cost of equity again.

And I'm gonna take that to the power of 0.5 and that will give me the value at the end of 2021. Now, because this is a P implied PE multiple, what I'm going to do is I'm gonna divide that by net income in the final year, and that will give me a little kind of sanity check about what my net income should be and I should use the recurring net income. So that gives me a multiple of 11.2 in the final year. Now, because this is a bank, I should also do an implied price to book value multiple. So I'm gonna do the same thing, and in fact, I can just copy that formula down, and in this case, instead of taking the net income, I'm gonna take the shareholders' equity. So I can just go up to the balance sheet and get the shareholders' equity, which is 1.7 there. So that's a little check and then I'm ready to do the discounting.