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Calculate the intrinsic value of Quest Limited shares

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Reference no: EM133049088

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.

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

A. R66.17

B. R61.75

C. R59.90

Reference no: EM133049088

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