How you deal with the income from marketable securities

Reference no: EM132065950

Question: 1. One firm is funded by equity and debt in equal amounts (at market value). One analyst estimated the WACC in the firm at 5% and the stable growth rate of dividends to be 3%. The dividend for the next year is expected to be $3. He estimates an intrinsic value for the share of $150. Assuming the same inputs, do you think his estimate of intrinsic value is too low, too high, or correct? Explain Answer: too high, of course. The analyst made a mistake. Which one?

2. Explain how you deal with the income from marketable securities in a firm's valuation?

Reference no: EM132065950

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