How much should stock worth today

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Reference no: EM131908834

(a) Stock A just paid a dividend of $2 and its management has also announced that it will pay a dividend of $2.12 in the coming year. If you expect the dividend growth of Stock A will remain in the current level forever, how much should Stock A worth today if the required rate of return is 10%?

(b) XYZ has just paid a dividend of $30 per share and the management has indicated that it will increase the dividend payments by 20%, 18% and 15% in each of the coming three years, and 10% per year thereafter. XYZ’s cost of equity is 17.5%. Estimate the intrinsic value of XYZ share.

Reference no: EM131908834

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