Question $4$

$4$ pts

Example: Applyinig the Gordon Growth Model

An analyst obtained the following information regarding Global Shipping Inc.:

Current share price $=$$$28$

Recent dividend per share $=$$$1\mathrm{.}95$

Earnings per share $=$$$4\mathrm{.}25$

Return on equity $=25\%$

Required rate of return $=20\%$

Use the Gordon growth model to estimate Global Shipping's intrinsic value. The question requires $4$ answers.

First, calculate the retention rat Input the answer as a percentage with two $.$ decimal places. No need to include the percent sign. Example, $99\mathrm{.}98$

Second, calculate the growth rate $.$ Input the answer as a percentage with two decimal places. No need to include the percent sign. Example, $99\mathrm{.}98$

Third, what is the intrinsic value Input the answer as a dollar and cents amount for the share price. No need to include the dollar sign. Example, $99\mathrm{.}98$

How much does the dividend growth assumption add to the intrinsic value estimate

$?$ Here, assume growth is $0,$ and use the equation Value $=\frac{D_o}{k}-g.$ Input the answer as a dollar and cents amount for the share price. No need to include the dollar sign. Example, $99\mathrm{.}98$

Think about this. No input needed. Based on the intrinsic value estimate, is the company's share undervalued, fairly valued, or overvalued?