Mason Corporation had $1,103,000 in invested assets, sales of $1,278,000, income from operations amounting to $238,000, and a de
1 answer:
Answer:
$94,610
Explanation:
Invested assets (A) = $1,103,000
Sales = $1,278,000
Income from operations (I) = $238,000
minimum rate of return (r) = 13%.
Residual income (RI) is the generated income that exceeds the minimum rate of return and can be defined as:
The residual income for Mason Corporation is $94,610
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Answer:
Intrinsic value: 53.41 dollars
Explanation:
First, we use the CAPM model to know the value of the stock
risk free 0.085
premium market =(market rate - risk free) = 0.045
beta(non diversifiable risk) 1.3
Ke 0.14350
Now we need to know the present value of the future dividends:
D0 = 2.8
D1 = D0 x (1+g) = 2.8 * 1.23 = 3.444
D2 3.444 x 1.23 = 4.2361200
The next dividends, which are at perpetuity will we solve using the dividned grow model:
In this case dividends will be:
4.23612 x 1.07 = 4.5326484
return will be how return given by CAPM and g = 7%
plug this into the Dividend grow model.
value of the dividends at perpetity: 61.6686857
FInally is important to note this values are calculate in their current year. We must bring them to present day using the present value of a lump sum:
3.011805859
3.239633762
47.16201531
We add them and get the value of the stock:
53.413455