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What is the intrinsic value of the stock today

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Reference no: EM13260035

A company's common stock is selling for $16. The stock just paid a dividend (D0) of $.60 and this dividend is expected to grow by 15% per year for three years. After that it will grow at a constant rate of 4%. The stock's beta is 1.7, the risk-free rate of interest is 1.75% and the market risk premium is 5.25%. According to the DCF model, what is the intrinsic value of the stock today? Given the current stock price today (P0 = $16), should you buy the stock and briefly explain why or why not?

Reference no: EM13260035

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