You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend...

  

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You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% a. What is the intrinsic value per share? [2.5 points] b. Quantify the upside or downside of the stock if you purchase the shares at market value. [0.5 point] You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% a. What is the intrinsic value per share? [2.5 points] b. Quantify the upside or downside of the stock if you purchase the shares at market value. [0.5 point]

Answer rating: 100% (QA)

a To calculate the intrinsic value per share using the 3stage Dividend Discount Model we need to cal... View the full answer