You are trying to estimate the intrinsic value of the shares of Flying High Ltd, a manufacturer of unmanned aerial vehicles, or drones. The company is headquartered in Melbourne, and sells its drones throughout Australia and New Zealand. It is a public company, but is not yet listed on the stock exchange. There are 30,000 shares outstanding. The most recent dividend was $2.6. The required rate of return for equity is 18.97%.   Book value of equity, per share, as at 31 December 2021 was $25.97. You have come up with the following forecasts:   - Earnings are expected to grow at 3.9% in perpetuity.   - The firm's Return on Equity is expected to remain constant at 23.46%.   What is the estimated value of the shares using a Residual Income Discount Model?   a. $33.71   b. $32.51   c. $31.68   d. $32.00

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You are trying to estimate the intrinsic value of the shares of Flying High Ltd, a manufacturer of unmanned aerial vehicles, or drones. The company is headquartered in Melbourne, and sells its drones throughout Australia and New Zealand. It is a public company, but is not yet listed on the stock exchange. There are 30,000 shares outstanding. The most recent dividend was $2.6. The required rate of return for equity is 18.97%.

 

Book value of equity, per share, as at 31 December 2021 was $25.97. You have come up with the following forecasts:

 

- Earnings are expected to grow at 3.9% in perpetuity.

 

- The firm's Return on Equity is expected to remain constant at 23.46%.

 

What is the estimated value of the shares using a Residual Income Discount Model?

 

a. $33.71

 

b. $32.51

 

c. $31.68

 

d. $32.00

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