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Compute its intrinsic value and fair market value

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Reference no: EM131959879

1. A stock’s next 3 dividends are as follows: $0.50, 0, $1.00. After that, the stock is expected to grow at a rate of 2% indefinitely. The required return on this stock is 12%. Compute its intrinsic value.

2. A stocks next 2 dividends are as follows: $0.25 and $1.00. After that, the stock is expected to grow at a rate of 4% indefinitely. The required return on this stock is 16%. Compute its fair market value.

3. Describe payback method in capital budgeting and how it is used?

Reference no: EM131959879

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