McDonalds recently completed the year and had earnings per share of $5 per share They do not plan on paying any dividends for the next two years, but in year 3, they will pay a dividend based on a payout policy of 80% of earnings and they plan to maintain that policy for the foreseeable future.

 

1.)If you are an investor who has a 12% required rate of return, how much would you be willing

to pay for this stock (the price today)?

 

2.)What is the company's present value of growth opportunities (PVG).?

Answer rating: 100% (QA)

To calculate the price you would be willing to pay for the stock the price today we can use the dividend discount model DDM and the concept of present value The DDM calculates the intrinsic value of a ... View the full answer