- Home >
- Business Finance >
- (TCO D) Find the intrinsic value of the stock of company ABC using the following
(TCO D) Find the intrinsic value of the stock of company ABC using the following
Question Description
(TCO D) Find the intrinsic value of the stock of company ABC using the following data:
risk free rate = 5%
market risk premium = 8%
Expected market return = risk free rate + market risk premium
beta = 0.9
ROE = 12.5%
dividend payout ratio = 0.22
Dividends for the next 4 years are expected to be .59, .67, .76, .85. Subsequent growth will be at the computed growth rate, g.
Suggestion:
1. Find g from ROE and payout ratio
2. Find k from CAPM
3. Find price of ABC 4 years out using the constant growth DDM
4. Find intrinsic value by discounting each annual dividend by (1+k)^n where n=number of years, summing them and adding the price in step 3 discounted by (1+k)^4.
This question has not been answered.
Create a free account to get help with this and any other question!
Similar Content
Underground A Human History of the Worlds Beneath our Feet
by Will Hunt
Narrative of the Life of Frederick Douglass
by Frederick Douglass
Shattered - Inside Hillary Clintons Doomed Campaign
by Amie Parnes and Jonathan Allen
Murder on the Orient Express
by Agatha Christie
The Visible Filth
by Nathan Ballingrud
Salt To The Sea
by Ruta Sepetys
You Are a Badass
by Jen Sincero
100 Side Hustles
by Chris Guillebeau
Studypool values your privacy. Only questions posted as Public are visible on our website.
Brown University
1271 Tutors
California Institute of Technology
2131 Tutors
Carnegie Mellon University
982 Tutors
Columbia University
1256 Tutors
Dartmouth University
2113 Tutors
Emory University
2279 Tutors
Harvard University
599 Tutors
Massachusetts Institute of Technology
2319 Tutors
New York University
1645 Tutors
Notre Dam University
1911 Tutors
Oklahoma University
2122 Tutors
Pennsylvania State University
932 Tutors
Princeton University
1211 Tutors
Stanford University
983 Tutors
University of California
1282 Tutors
Oxford University
123 Tutors
Yale University
2325 Tutors