What is the current intrinsic value of one share

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Plink Administrators Inc. currently has a book value of equity per share equal to $1. The company is expected to have ROE of 20% and reinvest 100% of its earnings every year over the course of the next 10 years. According to analysts' forecasts, Plink Administrators Inc. will be liquidated at the end of year 10 with a liquidation value equal to the book value of equity per share at the end of year 10. The required rate of return on the company's equity is equal to 20%. What is the current intrinsic value of one share of stock in Plink Administrators Inc.? (Assume that the current, i.e., t=0 dividend has already been paid.)

Reference no: EM132491800

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