A stock is expected to pay $2.73 per year in dividends. Assume an existing stockholder expects...

A stock is expected to pay $2.73 per year in dividends. Assume an existing stockholder expects to sell the stock for $62.53 in one year and requires 8.77% return on this stock investment.

What is the intrinsic value of this stock?

Expert Solution

P0 = (Div + P1) / (1 + r)

P0 = ($2.73 + $62.53) / (1 + 0.0877)

P0 = $60

jeff jeffy answered 2 years ago

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