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What is the intrinsic value of the stock today

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Problem 1: Microsoft is expected to pay a dividend of $2.50 per share next year (i.e., one year from today). You believe that Microsoft will generate a 12% annual growth rate in dividends over the subsequent ten years (i.e., from 2021 to 2031), after which MSFT will settle down to a 6% annual growth rate forever. The market requires an 8% annual return for MSFT. Assume for simplicity that MSFT only pays dividends annually with the next dividend payment made exactly one year from today. What is the intrinsic value of the stock today?

Reference no: EM132795395

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