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What is the intrinsic value of abx share

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Reference no: EM133116484

ABX Company recently paid a dividend of $1/ share. The dividend is expected to grow by 10% in year 1, 8% in year 2, 7% in year 3, and 6% in year 4. After that, its dividend is expected to grow at 5% per year forever. If ABX Company's cost of capital is 10%, what is the intrinsic value of ABX's share? 

If ABX's share currently trades at $18/ share, would you buy the share of ABX? Why? 

Cash flow (Div./ Price)

Year

Expected Div.

PV of Div.

D0

0

 

 

D1

1

 

 

D2

2

 

 

D3

3

 

 

D4

4

 

 

Terminal Value (year 4)

4

 

 

Reference no: EM133116484

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