Question

DWI has just paid an annual dividend of $2 per share, which is expected to grow at 5% indefinitely. If your client's required rate of return to meet her retirement goals is 12%, what is the intrinsic value of the stock using the constant growth dividend discount model?

Answer 1

The intrinsic value of the stock using the constant growth dividend discount model is $30.00

Step-by-step explanation:

intransic value of the stock = [2*(1 + 0.05)]/(0.12 - 0.05)

= $30.00

Therefore, The intrinsic value of the stock using the constant growth dividend discount model is $30.00