Fundamental or intrinsic value of share of faddy stock

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Faddy Corporation's line of business is to produce special birthday cakes for customers with birthdays on February 29th. Therefore Faddy only pays dividends in leap years. The next dividend of $6 per share will be paid in four years, and subsequent dividends will grow by 10% per four-year period. That is, in 8 years the dividend will be $6.60, in 12 years the dividend will be $7.26, and so on. Suppose the discount rate for Faddy is 7% per year (simple annual rate). Calculate the fundamental or intrinsic value of a share of Faddy stock. Please calculate by hand and check answers in excel.

Reference no: EM132073997

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