Homework Answers
Answer is $63
Last Dividend, D0 = $3.00
Growth Rate, g = 5%
Required Return, rs = 10%
Expected Dividend, D1 = D0 * (1 + g)
Expected Dividend, D1 = $3.00 * 1.05
Expected Dividend, D1 = $3.15
Intrinsic Price = D1 / (rs - g)
Intrinsic Price = $3.15 / (0.10 - 0.05)
Intrinsic Price = $3.15 / 0.05
Intrinsic Price = $63
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