ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question

please answer part c and d. Please make sure your answer is correct.

The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 24% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 19% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Use intermediate calculations rounded to 4 decimal places. Round your answer to 2 decimal places.) Answer is complete and correct. Intrinsic value per share $ b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Use intermediate values rounded to 2 decimal places. Round your answer to 2 decimal places.) Expected dividend yield 11.74 Answer is complete and correct. 10.56 % c. What do you expect its price to be one year from now? (Use intermediate values rounded to 4 decimal places. Round your answer to 2 decimal places.) $ Answer is complete but not entirely correct. Expected price 25.96 X d-1. What is the implied capital gain? (Use intermediate values rounded to 2 decimal places. Round your answer to 4 decimal places.) X Answer is complete but not entirely correct.
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Transcribed Image Text:The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 24% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 19% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Use intermediate calculations rounded to 4 decimal places. Round your answer to 2 decimal places.) Answer is complete and correct. Intrinsic value per share $ b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Use intermediate values rounded to 2 decimal places. Round your answer to 2 decimal places.) Expected dividend yield 11.74 Answer is complete and correct. 10.56 % c. What do you expect its price to be one year from now? (Use intermediate values rounded to 4 decimal places. Round your answer to 2 decimal places.) $ Answer is complete but not entirely correct. Expected price 25.96 X d-1. What is the implied capital gain? (Use intermediate values rounded to 2 decimal places. Round your answer to 4 decimal places.) X Answer is complete but not entirely correct.
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