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A firm is expected to pay a dividend of $6 in the upcoming year. Dividends are...

A firm is expected to pay a dividend of $6 in the upcoming year. Dividends are expected to decline at the rate of 3% per year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%. The stock has a beta of 0.5. Using the constant-growth DDM, the intrinsic value of the stock is ________.

$100

$50

$200

$150
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Answer #1

rate positively ..

Computation of required rate = 9.00%
5%+(13%-5%)*0.5
Price today = Exected dividend next year/(required rate - growth rate)
6/(9%+3%)
50
Answer = 50
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