One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He tells you that the company has a good track record of paying regular dividend every year and the dividends are likely to grow at a rate of 4% per year on an average for the foreseeable future. The next dividend is expected to be $1.50 per share and the shares are selling in the secondary market for $28.50 per share. As per your financial plans and life profile, you feel that any risky investment like in shares of a company, should earn at least 9% per annum. Compute the intrinsic value of the share

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Q: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

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A: The question can be solved as follows:

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Q: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

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A: Formulas:

Q: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

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