Estimate of the intrinsic value of a share of the stock

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The Duo Growth Company just paid a dividend of $1.2 per share. The dividend is expected to grow at a rate of 24% per year for the next 3 years and then to level off to 6% per year forever. You think the appropriate market capitalization rate is 21% per year.

a. What is your estimate of the intrinsic value of a share of the stock?

b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield?

c-1. What do you expect its price to be 1 year from now? What is the implied capital gain?

c-2. Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate?

Yes or No

Reference no: EM132000705

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