Fabric Val d’Or common stock is currently trading at $35 per unit on the Toronto Stock Exchange. The last annual dividend distributed is $2.25 per share. Financial analysts expect the company to pay the following dividends over the next few years:

Année	D1	D2	D3	D4	D5
Dividende	2.25* (1.05)	D1 *(1.09)	D2 *(1.07)	D3 *(1.05)	D4 *(1.03)

The dividend at the end of year 5 will be D4 *(1.03) and will grow at the same rate of 3% indefinitely. Given the risk involved, the annual return required by investors on this kind of security is 13%. Currently, the ordinary share of
Is Fabric Val d'Or overvalued or correctly valued by the market?

Answer rating: 100% (QA)

A B D E 1 Year 2 1 3 2 4 3 5 4 6 5 7 5 Value of security Cashflow PV of Cashflow 236 209 2... View the full answer