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Calculate the firm intrinsic value

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Hewlett-Packard's (HP) expected dividends for the coming year are $0.60 and expected earnings per share are $0.80. The required rate of return for HP is 15%. HP's ROE is 18% and plowback ratio is 25%.

A. Using the constant-growth dividend discount method, calculate the firm's intrinsic value.

B. Calculate the present value of growth opportunities for HP.

C. Suppose you found a positive PVGO for HP. In this case, should the firm continue with its current dividend policy or should it instead pay out 100% of earnings as dividend?

Reference no: EM132270447

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