The Duo Growth Company just paid a divided of $1 per share. The dividend is expected...
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The Duo Growth Company just paid a divided of $1 per share. The dividend is expected to grow at a rate of 25% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. a. What is your estimate of the intrinsic value of a share of the stock? (4 marks) b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (1 mark) c. What do you expect its price to be one year from now? (2 marks) The Duo Growth Company just paid a divided of $1 per share. The dividend is expected to grow at a rate of 25% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. a. What is your estimate of the intrinsic value of a share of the stock? (4 marks) b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (1 mark) c. What do you expect its price to be one year from now? (2 marks)
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