Victoria Companys beta is exactly 2, and the market risk premium is 8%, with a risk-free rate
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Question:
Victoria Company’s beta is exactly 2, and the market risk premium is 8%, with a risk-free rate of 4%. The company’s most recent dividend was $5 per share, and the dividend is expected to grow at 15% for the next three years and then grow at 6% per year indefinitely.
- What would be Victoria’s shares’ intrinsic value per share?
- What would be the dividend yield?
- If all the expectations stay the same as stated, what would the share price be a year from now? What would be your capital gain if you owned a share for the year? Show that this gain is consistent with the expected dividend yield calculated above.
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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