A company is expected to pay dividends of $2 per share next year and has a required rate of return of 12%. The company's earnings per share (EPS) are $5 and the dividend payout ratio is 40%. Assuming that the company's earnings and dividends are expected to grow at a constant rate, what is the estimated intrinsic value of the company's stock using the dividend discount model?

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The detailed answer for the above question is provided below The dividend discount model is a method of valuing a stock by discounting the future divi... View the full answer