Estimating Intrinsic Share Value Using Dividend Discount Model

Assume that Medtronic is expected to pay a $$2\mathrm{.}76$ dividend per share annually. Estimate its intrinsic value per common share using the dividend discount model $($DDM$)$ under each of the following separate assumptions. Assume that the company$$s cost of equity capital is $8\%.$ Round all calculations to two decimal places.

a$.$ The dividend per share occurs at the end of each of the next three years, after which there are no additional dividend payments.

$Answer $1$

$7\mathrm{.}11$

b$.$ The dividend per share occurs at the end of each year in perpetuity.

$Answer $2$

c$.$ The dividend per share occurs at the end of each of the next three years, after which the dividends increase at a rate of $4\%$ per year.

$Answer $3$