question archive The Belgravia Corporation is expected to pay a dividend of $1
The Belgravia Corporation is expected to pay a dividend of $1
Subject:FinancePrice:2.86 Bought5
The Belgravia Corporation is expected to pay a dividend of $1.75 per share next year. If the required rate of return is 12.3 percent per year and dividends are expected to grow indefinitely at a constant rate of 9.2 percent per year, the intrinsic value of Belgravia Corporation stock is (round the answer to 2 decimal places):
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The stock price now should be as per the constant dividend growth model
Stock price now = Dividend for Next Period / (Equity Cost of Capital - Constant Growth rate)
= 1.75 / (12.3% - 9.2%)
= 1.75 / ( 3.1%)
= 56.4516
The intrinsic value of Belgravia Corporation is $56.4516
