Determine whether it is overvalued or undervalued

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Question - XYZ Limited paid a DPS of Sh. 10 in the last accounting period. The DPS is expected to grow at 10% for the next three years and 8% for the next two years. An investor expects to sell the share at the end of year five for Sh. 53. The share is currently selling at Sh.90 in the market. Determine whether it is overvalued or undervalued urgently for an investor who intends to dispose the share at the end of year five. Assume cost of equity is 14%.

Reference no: EM133015219

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