Due to an extensive investment in research and development, Banana, Inc., recently developed a new wirelesscommunication system that should greatly increase the stock's dividend. One analyst believes the current annualdividend of $1 will increase by 20% for each of the next three years and then 6% for the foreseeable future.Calculate the intrinsic value per share of the company's stock assuming an investor's required rate of return of8%. A) $91.50 B) $78.49 C) $76.35 D) $95.91

Current Dividend = d0 = $1Growth Rate for next 3 Year = g3 = 20%Growth Rate after 3 Years = g =…

Answered: Due to an extensive investment in…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.’s stock (Ticker: PAMC) is trading at $13.75. • The company’s stock is expected to pay a year-end dividend of $0.66 that is expected to grow at a certain rate. • The stock’s expected rate of return is 6.60%. Based on the information just given, what will be Robert’s forecast of PAMC’s growth rate?
Now or Later, Inc. recently paid $2.10 as an annual dividend. Future dividends are projected at $2.5, $3 and $4 over the next three years, respectively. At the end of the third year, you expect to sell the stock for $34. The stock of the company is selling for $34 today. How much added wealth is expected from your investment in the stock given that the expected return is 6%
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