Melia Corporation Current share price $4.65 Current dividend $0.10 Required return on equity 6% Net Income $2.7 Mln Total shareholders’ equity $19 Mln

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
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Melia Corporation

Current share price

$4.65

Current dividend

$0.10

Required return on equity

6%

Net Income

$2.7 Mln

Total shareholders’ equity

$19 Mln

Beta

1.15

Ten year Melia bond yield

3.8%

Melia’s expected growth rate for the next five years is 18%, dropping to a long term

sustainable rate into perpetuity of 4%

 

 

For Melia, use a form of the dividend discount model to determine the

fair value of the share price.

Is Melia under or over-valued compared to the market

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