What do you expect its price to be one year from now? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) d-1. What is the implied capital gain? (Do not round intermediate calculations. Round your final answer to 1 decimal place.)
What do you expect its price to be one year from now? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) d-1. What is the implied capital gain? (Do not round intermediate calculations. Round your final answer to 1 decimal place.)
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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c. What do you expect its price to be one year from now? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
d-1. What is the implied
Transcribed Image Text:Problem 18-17
The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 25% per year for the
next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year.
a. What is your estimate of the intrinsic value of a share of the stock? (Do not round intermediate calculations. Round your final
answer to 2 decimal places.)
Intrinsic value per share
b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Do not round intermediate
calculations. Round your final answer to 2 decimal places.)
Expected dividend yield
%
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