Morphosis (Ltd) is a manufacturing company focusing on food production. The company recently paid a dividend of R2,50 per share and plans to increase its dividends by 10% in the first year, 15% in year 2, 20% in year 3 then level off at a constant rate of 5% thereafter. The T-bills are 6,50% and the return on the market is 25%. The standard deviations are 13 and 10 percent for Morphosis and the market respectively. The correlation coefficient between the two is 0,75. Find the intrinsic value of the share using ddm.

Morphosis (Ltd) is a manufacturing company focusing on food production. The company recently paid a dividend of R2,50 per share and plans to increase its dividends by 10% in the first year, 15% in year 2, 20% in year 3 then level off at a constant rate of 5% thereafter. The T-bills are 6,50% and the return on the market is 25%. The standard deviations are 13 and 10 percent for Morphosis and the market respectively. The correlation coefficient between the two is 0,75. Find the intrinsic value of the share using ddm.

Name: Morphosis (Ltd) is a manufacturing company focusing on food production
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Description: Morphosis (Ltd) is a manufacturing company focusing on food production. The company recently paid a dividend of R2,50 per share and plans to increase its dividends by 10% in the first year, 15% in year 2, 20% in year 3 then level off at a constant ra

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 4P

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Morphosis (Ltd) is a manufacturing company focusing on food production. The company recently paid a dividend of $2,50 per share and plans to increase its dividends by 10% in the first year, 15% in year 2, 20% in year 3 then level off at a constant rate of 5% thereafter. The T-bills are 6,50% and the return on the market is 25%. The standard deviations are 13 and 10 percent for Morphosis and the market respectively. The correlation coefficient between the two is 0,75. a) Calculate the risk premium. What does this mean? b) Determine the required rate of return using CAPM c) Find the intrinsic value of the share using the DDM.
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