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Find the share value of the two companies

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Reference no: EM132638106

Assume two listed companies for which the following pieces of information are provided:

  • Company A; announced that the stock will pay a constantly growing dividends with a growth rate of 8 %, next dividend is expected to be $20 per share and the discount rate is 10%.
  • Company B; announced that the stock will pay a constantly growing dividends with a growth rate of 3%, next dividend is expected to be $13 per share and the discount rate is 7%.

a) Find the share value of the two companies

b) If the current share price of company A is $910, and $400 for company B, determine which share is overvalued and which one is undervalued?

Reference no: EM132638106

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