The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to

Question:

The Duo Growth Company just paid a of $1 per share. The is expected to grow at a rate of 25% per year for the next 3 years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year.
a. What is your estimate of the intrinsic value of a share of the stock?
b. If the market price of a share is equal to this intrinsic value, what is the expected yield?
c. What do you expect its price to be 1 year from now? Is the implied capital gain consistent with your estimate of the yield and the market capitalization rate?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...