Determine the current intrinsic value for ibm

Reference no: EM133412385

Assignment:

IBM has generated annual dividend growth of 15.1% over the past 3 years. IBM's most recent annual dividend is $2.90. Assume IBM will continue to increase dividends at 15.1% for the next 5 years before reducing its dividend growth to 6% for the long term. Also assume that the required return for IBM stock is 9.5%. It is currently trading for $179.90.

Use the two-stage dividend discount model to determine the current intrinsic value for IBM given these assumptions.

Is the stock overvalued or undervalued? Briefly explain the possible reasons for your response.

Reference no: EM133412385

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