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Intrinsic value of bhb ordinary share

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(a) BH Berhad (BHB) just paid a dividend of RM2. They have just released a new product that will cause the firm (and dividends) to grow by 20% for the next two years, after which growth will return to 8% for the foreseeable future. Comparable shares are offering a 12% return. What is the intrinsic value of BHB's ordinary share?

(b) What does it mean to say an asset is "temporarily overpriced" or "temporarily underpriced"? How can such a situation happen? Why is such overpricing or underpricing likely to be temporary? Can you suggest a situation that might lead to permanent overpricing or underpricing of an asset?

Reference no: EM133112688

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