Question: An analyst is valuing Caterpillar (CAT) common stock using the single-stage dividend discount model. Last year, CAT paid an annual dividend of $2.5 per share.

An analyst is valuing Caterpillar (CAT) common stock using the single-stage dividend discount model. Last year, CAT paid an annual dividend of $2.5 per share. The analyst estimates the sustainable growth rate using an ROE of 28% and a payout ratio of 75%. The analyst also estimates the required return for CAT of 12.3%.

What is the per-share intrinsic value of CAT?

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