Chapter 9, Problem 8DQ

Summary Introduction

To calculate: The range of intrinsic values of shares of the company on the basis of different values of estimated dividend for next year, the rate of return on equity and growth rate and the inputs that will justify the current stock price.

Introduction:

Sensitivity Analysis:

It refers to the calculation of the values of a particular variable on the basis of different values of other variables on which the particular variable is dependent. In other words, in sensitivity analysis, the range of values of a particular variable is computed on the basis of different values of other variables or inputs.