Burger Kong is a hamburger chain that next year (2024) is estimated to pay $8.6 dividend per share. The chain has recently been installed in the country and it is estimated that during the next 3 years (2025 to 2027), the dividend will grow at a rate of 23% and then stabilize with a growth of 9% in perpetuity, due to a change in its dividend distribution policy. Consider that the rate of return required by investors from Burger Kong is 15%.

a) Determine the stock price of Burger Kong.

b) Assuming that the company distributes 40% of its profits in 2024, determine the present value of the company's growth opportunities (VPOC).

Answer rating: 100% (QA)

To calculate the stock price of Burger Kong you can use the dividend discount model DDM The DDM form... View the full answer