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Compute the intrinsic value and dividend yield of the stock

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Reference no: EM132960678

Problem - FMI Inc. is expected to experience a turnaround period for three years, during which its current dividends per share of $2.50 will be reduced by 30% annually for the next two years, and then to grow at 50% in the following year. Afterwards, its dividends will grow indefinitely at an annual rate that reflects a 40% dividend payout ratio and a ROE of 20%. The discount rate is 15%, compounded monthly. Compute the intrinsic value and dividend yield of the stock, which is priced at $38.50 today. What is your opinion on this stock?

Reference no: EM132960678

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