The ABC Company is about to pay a dividend of $3 per share i.e it is paying it later today). The dividend is expected to grow at a rate of 8% next year and 5% the year after, and then to stabilize at growth of 4% per annum into perpetuity thereafter.

The company's beta is 1.5, the risk-free rate is 2% and the market risk premium is 6%. Based on this information, what is your estimate of the intrinsic value of one share in ABC Company?

Answer rating: 100% (QA)

Step 1 Calculate the expected dividends for the next three years Dividend Dividend this year ... View the full answer