a) Newdeal Inc. follows a policy of distributing 45% of its profits and investing the rest in the operations of the company. The average profitability of its assets is 20% and the current year dividend per face value of 16 is 30%. Compute the intrinsic value of a stock of this company for an investor whose minimum required rate of return is 25%. b) Compute the value of this stock one year later under the same assumptions.
a) Newdeal Inc. follows a policy of distributing 45% of its profits and investing the rest in the operations of the company. The average profitability of its assets is 20% and the current year dividend per face value of 16 is 30%. Compute the intrinsic value of a stock of this company for an investor whose minimum required rate of return is 25%. b) Compute the value of this stock one year later under the same assumptions.
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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