What is the intrinsic value of the stock

Assignment Help Finance Basics
Reference no: EM133114811

You're willing to buy DEF Co.'s stock.  The stock currently trades at $130. The stock recently paid a quarterly dividend of $0.78 per share. Dividends are expected to grow at the rate of 10%, 15%, 11%, 12%,13% respectively, in the next five years. After that, the dividend growth rate will stabilize and dividends are expected grow at a constant rate of 8% forever. The current market discount rate on similar stocks is 10%. What is the intrinsic value of the stock? Should you buy the stock?

Cash flow (Div./ Price)

Year

Expected Div.

PV of Div.

D0

0

 

 

D1

1

 

 

D2

2

 

 

D3

3

 

 

D4

4

 

 

D5

5

 

 

Terminal Value (year 5)

5

 

 

Reference no: EM133114811

Questions Cloud

What is sommers ev-ebitda ratio : Sommers Industries has $3,900,000,000 in total assets-of which cash and equivalents total $70,000,000. Its balance sheet shows $500,000,000 in current liabiliti
Credible secondary sources for your project : Now that we have discussed the importance of using credible secondary sources for your project, let us start annotating!
How does evangelism affect diffusion : How does evangelism affect diffusion? Do you think that animism is common in world religions? How does language contribute to ethnic conflict?
What amount should reported as investment in david company : The entity owned 25,000 shares, representing 5% ownership interest in this mining company, at a cost of P2,500,000. What amount should reported as investment
What is the intrinsic value of the stock : You're willing to buy DEF Co.'s stock. The stock currently trades at $130. The stock recently paid a quarterly dividend of $0.78 per share. Dividends are expec
Social and cultural reasons for drinking in college : What are social and cultural reasons for drinking in college? Remember, not all college students drink alcohol, and not everyone that drinks is an alcoholic
Compute the expected value-standard deviation : Compute the Expected Value, Standard Deviation, and Coefficient of Variation.
Calculate the debt-to-asset ratio : Samantha Knight is applying for a small-business loan. She provides the bank with the following information:
Types of information technology applications : What main types of information technology applications are used in medical care delivery? Why are they important?

Reviews

Write a Review

Finance Basics Questions & Answers

  Selection of a project on the basis payback and net present

Selection of a project on the basis Payback and net present value and Which of the two projects should be chosen based on the payback method

  What is average tax rate

Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information:

  What is the amount of the net savings from subscribing

The initial charge for this service is $540, with an additional charge of $6 per individual report. What is the amount of the net savings from subscribing

  What is the yield to maturity of the? bonds

What is the yield to maturity of the? bonds?? (Round to two decimal? places.)

  Making capital budgeting decision

Comment on the following: Since net present value (NPV) method is considered by many people to be the best form of analysis when analysing

  What will be the balance of the rrsp

Walter is 30 years old and plans to start making savings for his retirement a priority this year. What will be the balance of the RRSP

  Should the spectrometer be purchased

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $200,000, and it would cost another $30,000.

  Why should investors be concerned about market rents

Why should investors be concerned about market rents if they are purchasing a property subject to leases?- What is meant by equity?

  How is a cds similar to insurance

Why might AIG's computer models have given an incorrect forecast of the likelihood of the firm having to make a payment on the CDSs they were selling?

  Find the future value of these cash flows.

FV of multiple cash flows: Stiglitz, Inc., is expecting the following cash flows starting at the end of the year-$113,245, $132,709, $141,554, and $180,760. If their opportunity cost is 9.6 percent, find the future value of these cash flows.

  Discuss the differences between cash flow and accounting

discuss the differences between cash flow and accounting income and why it is important to use cash flow in making

  Questions of using military force

Short of military action should legislators play a significant role in other foreign policy areas such as economic sanctions immigration or military alliances?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd