What is the intrinsic value of stock

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Reference no: EM131910359

1. A company earns $1 million per year. It pays a quarterly $1 cash dividend to each of its 150,000 shares. The payout ratio is

(a) 25 percent (b) 40 percent (c) 50 percent (d) 60 percent

2. A stock just paid a $1 dividend (it pays dividends once per year). The dividend is expected to grow at 4% per year indefinitely. The stock is trading for $19.25 per share. What rate of return (k, calculated using CAPM) is implied?

(a) 8.4% (b) 9.4% (c) 10.4% (d) 11.4%

3. A stock just paid a $1 dividend (it pays dividends once per year). The dividend is expected to grow at 5% per year indefinitely. Using CAPM, the company’s cost of equity (expected return on its common stock) is 12.5%. What is the intrinsic value of this stock?

(a) $21 (b) $14 (c) $13.33 (d) $8.08

Reference no: EM131910359

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