Ask Question
6 August, 14:50

Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. She also expects the stock to sell for $46 a share one year from now. What is the intrinsic value of this stock if the dividend payout ratio is 40% and the discount rate is 13.5%

+3
Answers (1)
  1. 6 August, 16:57
    0
    Answer: $42.63

    Explanation:

    To calculate this we will add the present value of Future cash flows (dividends) to the present value of the stock.

    Dividend per share one year from now is,

    = 238/100

    = $2.38

    Stock Price a year from now = $46

    Discount rate is $13.5%

    PV of sum = 2.38 / (1+0.135) + 46 / (1 + 0.135)

    = 42.6255506608

    = 42.63

    $42.63 is the Intrinsic value of the stock.

    If you need any clarification do react or comment.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. She also expects the stock to sell for $46 a share ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers