You're willing to buy DEF Co.'s stock. The stock currently trades at $130. The stock recently paid
Fantastic news! We've Found the answer you've been seeking!
Question:
You're willing to buy DEF Co.'s stock. The stock currently trades at $130. The stock recently paid a quarterly dividend of $0.78 per share. Dividends are expected to grow at the rate of 10%, 15%, 11%, 12%,13% respectively, in the next five years. After that, the dividend growth rate will stabilize and dividends are expected grow at a constant rate of 8% forever. The current market discount rate on similar stocks is 10%. What is the intrinsic value of the stock? Should you buy the stock?
Cash flow (Div./ Price) | Year | Expected Div. | PV of Div. |
D0 | 0 | ||
D1 | 1 | ||
D2 | 2 | ||
D3 | 3 | ||
D4 | 4 | ||
D5 | 5 | ||
Terminal Value (year 5) | 5 |
Related Book For
Forensic And Investigative Accounting
ISBN: 9780808056300
10th Edition
Authors: G. Stevenson Smith D. Larry Crumbley, Edmund D. Fenton
Posted Date: