Stock using the two-stage dividend discount model

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You see a fast growing company that is estimated to have dividend growth of 24%, 20%, and 16% over each of the next three years (24% in year 1 in year 2 20% and in year 3 16%) The company paid a dividend of $2.28 per share over the past twelve months. Dividends are expected to grow at a constant rate of 3.0% per year beginning in year 4 to perpetuity. The risk-free rate of return is 4% and the market risk premium is 6%. The stock has a beta of 1.25 versus the S&P 500. Calculate the intrinsic value of this stock using the two-stage dividend discount model.

Reference no: EM13835257

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