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Ma3. For the valuation of the HZ stock, the following forecast is considered the most reasonable: the company will keep up the current 20% annual growth of its dividends for two more years, and then the company will stabilized to a long-run dividend growth rate of 5% for the foreseeable future. You know that the last dividend paid on the stock is $2 per share.   a. What will be your estimate of its stock value if the required return on the stock is 12%?   b. Name one major problem with, or limitation of, the Discounted Dividend Model for stock valuation.

Ma3. For the valuation of the HZ stock, the following forecast is considered the most reasonable: the company will keep up the current 20% annual growth of its dividends for two more years, and then the company will stabilized to a long-run dividend growth rate of 5% for the foreseeable future. You know that the last dividend paid on the stock is $2 per share.   a. What will be your estimate of its stock value if the required return on the stock is 12%?   b. Name one major problem with, or limitation of, the Discounted Dividend Model for stock valuation.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...
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Ma3.

For the valuation of the HZ stock, the following forecast is considered the most reasonable: the company will keep up the current 20% annual growth of its dividends for two more years, and then the company will stabilized to a long-run dividend growth rate of 5% for the foreseeable future. You know that the last dividend paid on the stock is $2 per share.

 

a. What will be your estimate of its stock value if the required return on the stock is 12%?

 

b. Name one major problem with, or limitation of, the Discounted Dividend Model for stock valuation.

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