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What's the intrinsic value of a company that currently pays a dividend of $0.60 per share...

What's the intrinsic value of a company that currently pays a dividend of $0.60 per share and that dividend is expected to grow at a rate of 8% annually? The required rate of return is 12% annually.

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Expert Solution

Using Constant Growth Model,

Intrinsic value = D0(1 + g)/(r - g)

Intrinsic value = 0.60(1.08)/(0.12 - 0.08)

Intrinsic value = $16.20

jeff jeffy answered 2 years ago
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