Question 19 You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% Page 8 of 11 a. What is the intrinsic value per share? b. Quantify the upside or downside of the stock if you purchase the shares at market value.

Question 19 You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% Page 8 of 11 a. What is the intrinsic value per share? b. Quantify the upside or downside of the stock if you purchase the shares at market value.

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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