The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%. Introduction: Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

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Answer 1

Question

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

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Students have asked these similar questions

Your global beta is 1.03. The risk-free rate is 2.4%. Assume GRP is 7%. What is your global cost of equity?

Calculate the intrinsic value of Rio Tinto in each of the following scenarios by using the three-stage growth model of Spreadsheet 18.1; Treat each scenario independently. a. The terminal growth rate will be 10.30%. (Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. $ 171.33 X Intrinsic value b. Rio Tinto's actual beta is 1.05. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Intrinsic value $ 141.48 c. The market risk premium is 9.50%. (Round your answer to 2 decimal places.)

Assume the risk-free rate is 2.5% and the market risk premium is 8.0%. The beta of GE is 1.10. The dividend forecast for the next four years is as follows: 2017: $1.04 2018: $1.22 2019: $1.41 2020: $1.60 Using the dividend payout ratio (53%) and Return on Equity (19.5%), what is closest to the intrinsic value of GE stock using the dividend discount model? Question 9 options: a) $53.40 b) $140.00 c) $97.98 d) $75.83

Answer 2

Question

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

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Answer 3

Question

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

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Answer 4

Question

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

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Answer 5

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

Answer 6

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

Answer 7

Chapter 18, Problem 15PS

a.

Summary Introduction

To calculate: The intrinsic value of GE by using three-stage growth model when the terminal growth is 7%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value. The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

Answer 8

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

Answer 9

b.

Summary Introduction

To calculate: The intrinsic value when the GE’s actual Beta is 1.0.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

Answer 10

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

Answer 11

c.

Summary Introduction

To calculate: The intrinsic value when the market premium is 7.5%.

Introduction:

Intrinsic value: When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value. Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.

Answer 12

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Answer 14

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Answer 15

Ch. 18 - Prob. 1PS Ch. 18 - Prob. 2PS Ch. 18 - Prob. 3PS Ch. 18 - Prob. 4PS Ch. 18 - Prob. 5PS Ch. 18 - Prob. 6PS Ch. 18 - Prob. 7PS Ch. 18 - Prob. 8PS Ch. 18 - Prob. 9PS Ch. 18 - Prob. 10PS

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