2) The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a rate of 25% per year for the next 3 years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. What is your estimate of the intrinsic value ofa share of the stock?
2) The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a rate of 25% per year for the next 3 years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. What is your estimate of the intrinsic value ofa share of the stock?
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 12P
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![2) The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected
to grow at a rate of 25% per year for the next 3 years and then to level off to 5% per year
forever. You think the appropriate market capitalization rate is 20% per year. What is your
estimate of the intrinsic value ofa share of the stock?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F487b3ec6-f65f-470f-b990-93d7993c7c84%2F1fc75066-a0c4-4d50-8ee0-7889382e476d%2Fohorhb6_processed.png&w=3840&q=75)
Transcribed Image Text:2) The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected
to grow at a rate of 25% per year for the next 3 years and then to level off to 5% per year
forever. You think the appropriate market capitalization rate is 20% per year. What is your
estimate of the intrinsic value ofa share of the stock?
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