Calculate the intrinsic value of quest limited shares

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Question - An equity analyst analyses the financial statements of Quest Limited. From the analysis, she draws the following conclusions and assumptions:

Earnings of Quest Limited will grow at 10% for 2 years, where after it will stabilise to 5% per annum indefinitely.

The current dividend payout ratio will be maintained by Quest Limited.

The required rate of return on equity is 9.80%.

A recent dividend of R2.50 was declared and paid by Quest Limited to its shareholders.

The number of ordinary shares outstanding in 2019 is 10 000.

Required - Calculate the intrinsic value of Quest Limited shares, using the dividend discount model (DDM).

Reference no: EM133025841

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