A stock currently pays a dividend of $1 00 per share Dividend growth rates in years 1 4 are expected to be 25 , 20 , 15 , and 10 , respectively Starting in year 5 dividend growth is expected to settle down to a long term average rate of 5 The stock 's CAPM required return 9 0 a ) Calculate the intr...

a The stocks intrinsic value present value of all expected dividends 4037 using a dis ...

A stock currently pays a dividend of $1.00 per share. Dividend growth rates in years 1-4 are

Question:

A stock currently pays a of $1.00 per share. growth rates in years 1-4 are expected to be 25%, 20%, 15%, and 10%, respectively. Starting in year 5 growth is expected to settle down to a long-term average rate of 5%. The stock's CAPM required return = 9.0%.
a.) Calculate the intrinsic value of the stock.
b.) What is the stock's if you buy it for $35 per share? Explain why the at $35 per share differed from 9.0%.
c.) Calculate the stock's if you buy it for $45 per share. Explain why the at $45 per share differed from 9.0%.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...