Expected rate of return QUESTION 13 Ellcon Inc preferred stock pays a constant annual dividend of...

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Answer 1

Answer #1

This is a special case of the Gordon Growth Model

The zero growth DDM model assumes that dividends have a zero growth rate. In other words, all dividends paid by a stock remain the same.

V=D/K

where V is the intrinsic value of the stock, D is the annual dividends, and K is the required rate of return.

Putting Values,

V = 15.37 / 0.1424

= 107.935

The intrinsic value per share is $107.935

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Answer 2

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