Given below are the expected dividends of Kwik Inc. for the next five years. After year five,
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Question:
Given below are the expected dividends of Kwik Inc. for the next five years. After year five, the dividends are expected to grow at a constant rate of 3% per year forever. Investors require a return of 9% on this stock. The current market price of one share is $36.35
Expected Dividend:
Year 01: $1.50
Year 02: $2.00
Year 03: $2.45
Year 04: 2.80
Year 05: $3.00
a) Which year is the "terminal date" for Kwik Inc.? b) How much is the terminal value? c) What is the intrinsic value of a share today? d) Is the stock overvalued or undervalued?
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
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