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SSSSS [86.1K]
3 years ago
7

Each of two stocks, C and D, are expected to pay a dividend of $3 in the upcoming year. The expected growth rate of dividends is

9% for both stocks. You require a rate of return of 10% on stock C and a return of 13% on stock D. The intrinsic value of stock C
Business
1 answer:
Stels [109]3 years ago
8 0

Answer:

Intrinsic value of Stock C is 300

Explanation:

given data

expected pay dividend = $3

growth rate of dividends = 9%

stock C require a rate of return = 10%

stock D require a rate of return = 13%

solution

we get here intrinsic value by the DDM method

intrinsic value = Upcoming Dividend ÷ ( Required rate of return - Growth rate of stock )  .................1

intrinsic value = \frac{3}{(0.10-0.09)}    

intrinsic value = \frac{3}{0.01}  

intrinsic value = 300

so intrinsic value of Stock C is 300

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