In: Finance
For the next three years MBA Inc. is expected to pay $1.50, $2.00 and $2.50 in dividends and after that dividends will grow at the rate of 4% in perpetuity. The required rate of return is 12%. Assuming the first dividend will be paid in exactly one year, the intrinsic value of MBA shares is
A. $28.96
B. $38.50
C. $25.37
D. $27.85
Ans is D.$27.85
Calculations-
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