ABX Company recently paid a dividend of $1/ share. The dividend is expected to grow by 10%
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Question:
ABX Company recently paid a dividend of $1/ share. The dividend is expected to grow by 10% in year 1, 8% in year 2, 7% in year 3, and 6% in year 4. After that, its dividend is expected to grow at 5% per year forever. If ABX Company's cost of capital is 10%, what is the intrinsic value of ABX's share?
If ABX's share currently trades at $18/ share, would you buy the share of ABX? Why?
Cash flow (Div./ Price) | Year | Expected Div. | PV of Div. |
D0 | 0 | ||
D1 | 1 | ||
D2 | 2 | ||
D3 | 3 | ||
D4 | 4 | ||
Terminal Value (year 4) | 4 |
Related Book For
Holt McDougal Larson Geometry
ISBN: 9780547315171
1st Edition
Authors: Ron Larson, Laurie Boswell, Timothy D. Kanold, Lee Stiff
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