Telmax Inc
Subject:FinancePrice:2.86 Bought3
Telmax Inc. has adopted the policy of reinvesting 55 % of its profits .The profitability of its assets is equal to 20 %. The current dividend per share is 32 % per face value of 1 ?. Compute the intrinsic value of a share of this company for an investor whose minimum required rate of return is 24%.
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intrinsic value = current dividend per share * (1 + growth rate) / (required return - growth rate)
growth rate = retention ratio * return on assets = 55% * 20% = 11%
intrinsic value = (?1 * 32%) * (1 + 11%) / (24% - 11%)
intrinsic value = ?2.73
