An investor has examined Home Depot stock and makes the following predictions for the future: YEAR 1 2 3 4 DIVIDEND $1.40 $1.57 $1.52 $1.51 The investor...

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Finance

An investor has examined Home Depot stock and makes thefollowing predictions for the future:
YEAR 1 2 3 4
DIVIDEND $1.40 $1.57 $1.52 $1.51

The investor believes the selling price in four years will be$79.98. If the investor wants a 15.00% return to hold the stock,what intrinsic value does the investor put on Home Depot today?
Answer Format: Currency: Round to: 2 decimalplaces.

YEAR	1	2	3	4
DIVIDEND	$1.40	$1.57	$1.52	$1.51

Answer & Explanation Solved by verified expert

3.7 Ratings (370 Votes)

Ans 50.00

Year	Project Cash Flows (i)	DF@ 15%	DF@ 15% (ii)	PV of Project A ( (i) * (ii) )

1	1.40	1/((1+15%)^1)	0.870	1.22
2	1.57	1/((1+15%)^2)	0.756	1.19
3	1.52	1/((1+15%)^3)	0.658	1.00
4	1.51	1/((1+15%)^4)	0.572	0.86
4	79.98	1/((1+15%)^4)	0.572	45.73
		PV		50.00

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An investor has examined Home Depot stock and makes thefollowing predictions for the future:YEAR1234DIVIDEND$1.40$1.57$1.52$1.51The investor believes the selling price in four years will be$79.98. If the investor wants a 15.00% return to hold the stock,what intrinsic value does the investor put on Home Depot today?Answer Format: Currency: Round to: 2 decimalplaces.