You have been directed to determine the value of Company XYZ stock which is currently...
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You have been directed to determine the value of Company XYZ stock which is currently trading at $33.8. Company XYZ paid a dividend of $1.25 in the most recent year (Do). In addition, the risk free rate is 1.4% and the expected market risk premium is 3%. You have estimated Company XYZ's beta to be 1.2. You believe that Company XYZ's dividends will grow at 7% per year for the first three years and at 4% thereafter. You also believe that expected market risk premium will be 5%, risk free rate will be 2.6%, and Company XYZ's beta to be 1.4 for the constant growth period.
Estimate the intrinsic value of Company XYZ by using the two-stage dividend discount model.
Based on your estimate of Company XYZs intrinsic value would you recommend it for purchase? Yes or No.
You have been directed to determine the value of Company XYZ stock which is currently trading at $33.8. Company XYZ paid a dividend of $1.25 in the most recent year (Do). In addition, the risk free rate is 1.4% and the expected market risk premium is 3%. You have estimated Company XYZ's beta to be 1.2. You believe that Company XYZ's dividends will grow at 7% per year for the first three years and at 4% thereafter. You also believe that expected market risk premium will be 5%, risk free rate will be 2.6%, and Company XYZ's beta to be 1.4 for the constant growth period.
Estimate the intrinsic value of Company XYZ by using the two-stage dividend discount model.
Based on your estimate of Company XYZs intrinsic value would you recommend it for purchase? Yes or No.
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