Current value of stock on basis of dividend discount model

Assignment Help Financial Management

Reference no: EM13871296

Currently Omega Corporation’s shares are selling at $60 per share and company is paying $5 per share dividend. Dividends are expected to grow at an annual rate of 3% for foreseeable future. Required rate of return for investors is 12%. At the same time, Heller Corporation’s shares are selling at $58 per share and company is paying $4 per share dividend. Dividends are expected to grow at an annual rate of 5% for foreseeable future. Required rate of return for investors is 12%

a. Calculate the current value of each stock on the basis of Dividend Discount Model.

b. On the basis of above calculation, determine either each stock is overvalued or undervalued.

Reference no: EM13871296

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