Question

Carnival Corporation (CCL) & Plc operates as a leisure travel company. The company's ships visit approximately 700 ports under the Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard brand names. Carnival expects to pay a year-end dividend of $1.60. Investors expect the growth rate in dividends to increase at a constant rate of 8 percent a year. Assume that investors require a rate of return of 15 percent for Carnival stock. Assume that Carnival’s stock is currently trading at $36. Required: Calculate the price (intrinsic value) of Carnival stock and discuss whether this stock is over or undervalued.

Answer 1

Dividend COPS) 81 growth rate = Required hom. (ke) dividend dicount model. : DPS, mps = & overvalued becaux fermele given, $1-Go 15%. Using ke og 1-608 feur Share price (mps) Cerment market price Itt everya 1.608. 0.15-0-08 0.07 822.85 836 فيلمه is less them Actual value