What is BBWCs intrinsic value

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Question - The Boulder Brass Works Company (BBWC) is a small-capitalization machine shop that has found a rapidly growing niche market for its custom-machined brass parts. Its business is growing so fast that it has decided not to pay dividends for the next 2 years. However, in year 3 it expects its growth to beginning decelerating, so it plans to begin paying dividends at that time. At the end of year 3 it plans to pay a dividend of $2.00. At the end of year 4 it plays to pay a dividend of $3.00. Beginning in year 5, BBWC's management believes that the company will have entered its middle age. Management anticipates being able to sustain a dividend growth rate of 4% per year in year 5 and every year thereafter. Firms with similar growth and risk characteristics return 9% per year to their equity investors. What is BBWC's intrinsic value?

Reference no: EM132973948

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