It is now Dec 2020 and XYZ Limited has just paid a dividend of 2.00. Dividends will increase by 3% for the next four years and then the growth rate will reduce to1.5%.

The risk-free rate is 2%, the expected market return is 6 % and the beta of XYZ Limited according to Bloomberg is 1.2

a) Calculate the expected return on a share in XYZ Limited

b) Calculate the intrinsic value of a share in XYZ Limited

Answer rating: 100% (QA)

To calculate the expected return on a share in XYZ Limited we can use the Capital Asset Pricing Mod... View the full answer