A stock just paid a dividend of D0 = $8.50. The required rate of return is rs...

A stock just paid a dividend of D₀ = $8.50. The required rate of return is r_s = 12.3%, and the constant growth rateis g =6.0%. What is the stock’s intrinsic value?

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Expert Solution

The value is computed as follows:

= [ D0 x (1 + growth rate) ] / (required rate of return - growth rate)

= [ $ 8.50 x (1 + 0.06) ] / (0.123 - 0.06)

= $ 9.01 / 0.063

= $ 143.02

jeff jeffy answered 2 years ago

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