Share Valuation A. Giant Growth Co. is growing fast. Dividends are expected to grow at a 20% growth rate for the next three years, 30% in the fourth year, then fall off to a constant 7% growth rate thereafter. The required rate of return is 23% and the company recently paid a R1.40 dividend. Determine the intrinsic value of the share The intrinsic value of the share (Po) 1 D1 B. The current market price of the share is R45. Would you buy the share? Please state why? 2 D2 3 D3 4 D4 P4

Share Valuation A. Giant Growth Co. is growing fast. Dividends are expected to grow at a 20% growth rate for the next three years, 30% in the fourth year, then fall off to a constant 7% growth rate thereafter. The required rate of return is 23% and the company recently paid a R1.40 dividend. Determine the intrinsic value of the share The intrinsic value of the share (Po) 1 D1 B. The current market price of the share is R45. Would you buy the share? Please state why? 2 D2 3 D3 4 D4 P4

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 5P: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s...

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Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?
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