Answered: find the intrinsic value of each firm…

find the intrinsic value of each firm by using the appropriate valuation method.

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

8th Edition

ISBN:9781285065137

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 6DQ

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Question

The followings are information about three different companies. If an investor is having a required return of 12%, find the intrinsic value of each firm by using the appropriate valuation method.

Darius Holding

Elliot's Group

Freddie Incorporation

Last year's dividend (per share)

$1.85

$1.50

Information on the next dividend

The dividend is expected to remain the same (no growth)

The dividend will grow by 5% indefinitely

Year 1: RM2.13

Year 2: RM2.45

Year 3: RM2.81

Year 4: RM3.24

Year 5: RM3.72

Year 5 and beyond: it will grow by 5%

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Step 4: : Intrinsic value of Freddie incorporation’s share

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The followings are information about three different companies. If an investor is having a required return of 12%, find the intrinsic value of each firm by using the appropriate valuation method. Darius Elliot's Freddie Holding Group Incorporation Last year's RM1.85 RM1.50 RM2 dividend (per share) Information on the The will Expected 5% in: dividend is The dividend dividend next dividend expected to remain the grow by same (no growth) indefinitely Year 1: RM2.13 Year 2: RM2.45 Year 3: RM2.81 Year 4: RM3.24 Year 5: RM3.72 Year 5 and beyond: it will grow by 5%
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