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For the next three years MBA Inc. is expected to pay​ $1.50, $2.00 and​ $2.50 in...

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

Solutions

Expert Solution

Ans is D.$27.85

Calculations-

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