Presently enjoying relatively high growth

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Reference no: EM13729535

Rentz RVs Inc. (RRV) is presently enjoying relatively high growth because of a surge in the demand for recreational vehicles. Management expects earnings and dividends to grow at a rate of 30% for the next 4 years, after which high gas prices will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25. RRV’s beta is 1.20, the market risk premium is 4.50%, and the risk-free rate is 3.00%. What is the intrinsic value of RRV’s common stock? (Please show calculations)

Reference no: EM13729535

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