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What should be the intrinsic value of the stock today

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Question: The growth in dividends of XYZ Ltd is expected to be 10% per year for the next two years, followed by a growth rate of 5% per year for three years; after this five-year period, the growth in dividends is expected to be 2% per year, indefinitely. The beta of XYZ is 1.50. The risk-free rate (rf) and the expected return on the market portfolio (E(Rm)) are 3% and 9% respectively. The XYZ paid a dividends per share of $2.00 last year. Using the Capital Asset Pricing Model to determine the required rate of return, what should be the intrinsic value of the stock today?

Reference no: EM132756125

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