Question
Asked Jan 14, 2020
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Assume a stock paid a dividend of $1 per share over the last year, the required rate of return on the stock is 5%, and the dividends are expected to grow at a constant rate of 11% into the future. What is the intrisic value of this stock?

A. $16.67

B. $17.50

C. $9.55

D. Cannot determine without additional information

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Expert Answer

Step 1

Calculation of Intrinsic Value of Stock:

The required return of the stock is less than the growth rate of the stock. Hence the sto...

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