Topic: Stock Valuation

Question 1:

Compaq Computer has the following info:

The kg = 12% g=8% and D1= RM3.38. Compute the intrinsic value of Compaq if the dividend is expected to grow at constant rate.

Question 2

The Digi's annual dividend was RM2.20 per share and the firm's required rate of return is 15%. Find the intrinsic value of the company's share if dividends are expected to grow at 7 percent annually for 3 years followed by 4 percent constant annual growth rate from year 4 to infinity.

Question 3:

The Rapid Growth Company is expected to pay a dividend of $1.00 at the end of this year. Thereafter, the dividends are expected to grow at the rate of 25% per year for 2 years, and then drop to 18% for 1 year, before settling at the industry average growth rate of 10% infinitely. If you require a return of 16% to invest in a stock of this risk level, how much would you be justified in paying for this stock?

Question 4

The Regtech Sdn Bhd has released the following financial data about the company:

Earning available for common shareholder RM1,000,000 Number of shares of common stock outstanding 400,000 Earning per share (EPS) RM2.50 Market Price (MP) RM50.00 Price to Earning ratio (P/E) 20.00Earnings after taxes $ 800,000 Number of common shares outstanding 400,000 Earnings per share $2 Current market price per share $31