You won an amount of $750 000 in a lottery and are considering investing it in shares

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You won an amount of $750 000 in a lottery and are considering investing it in shares of Chiral Limited. This company will pay a dividend $1.46 one year from now which is expected to grow at an annual rate of 13% until the third year. Thereafter the dividend will grow at 7% per annum forever.

(a) Calculate the value of the Chiral Limited share using the Dividend Discount Valuation Model if the required rate of return is 11%. (8.5 marks)

(b) Explain whether it would be worthwhile to buy the shares if they are trading on the Australian Securities Exchange at $56 per share.

Related Book For answer-question

Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Posted Date: Jun 01, 2023 07:05 AM

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You won an amount of $750 000 in a lottery and are considering investing it in shares

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Fundamentals Of Corporate Finance

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