Determining the constant growth model

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Q 1). The equity stock of Racks Limited is currently selling for Rs 30 per share. The dividend expected next year is Rs 2.00. The investors' required rate of return on this stock is 15 percent. If the constant growth model applies to Racks Limited, what is the expected growth rate?

Q 2). Yardman Limited's earnings and dividends have been growing at a rate of 18 percent per annum. This growth rate is expected to continue for 4 years. After that the growth rate will fall to 12 percent for the next 4 years. Thereafter, the growth rate is expected to be 6 percent forever. If the last dividend per share was Rs 2.00 and the investors' required rate of return on Yardman's equity is 15 percent, what is the intrinsic value per share?

Reference no: EM132507487

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