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  3. 3. calculate the intrinsic value of abc corp using

3. Calculate the intrinsic value of ABC Corp using a three-stage dividend model assuming: ...

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Accounting

3. Calculate the intrinsic value of ABC Corp using a three-stage dividend model assuming:
The current dividend is $5 per share and the current payout ratio is 30% this is D(0) and POR(0) as I said in video EPS = DPS / POR use that to derive EPS(0)
starting next year the company will increase the payout ratio by 10% points per year (ex. from 25 to 35%) for the next 3 years.
The earnings per share is expected to grow 20% per year for the next 3 years
The earnings per share is expected to grow 15% for years 4-6(the payout ratio will not change from year 3.
The earnings per share in year 7 and beyond is expected to grow at a constant rate of 4%, hence the DPS will also grow at 4%
The required rate of return is 10%
NOTE Dividend per shares = Earnings per share X Payout Ratio
Payout Ratio = The amount of earnings that a company pays out in dividends

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