Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the duo growth company just paid a dividend of $3.

The Duo Growth Company just paid a dividend of $3.2 per share. The dividend is...

50.1K

Verified Solution

Question

Accounting

The Duo Growth Company just paid a dividend of $3.2 per share. The dividend is expected to grow at a rate of 14% per year for the next three years and then to level off to 10% per year forever. You think the appropriate market capitalization rate is 19% per year.

a. What is your estimate of the intrinsic value of a share of the stock? (Do not round your intermediate calculations. Omit the "$" sign in your response. Round your answer to 2 decimal places.)

Intrinsic value per share $

b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Expected dividend yield %

c. What do you expect its price to be one year from now? Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate? (Do not round your intermediate calculations. Omit the "$" & "%" signs in your response. Round your answers to 2 decimal places.)

Expected price $
Capital gain %

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students