a. IBXs stock dividend at the end of this year is expected to be $2.15, and it
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a. IBX’s stock dividend at the end of this year is expected to be $2.15, and it is expected to grow at 11.2% per year forever. If the required rate of return on IBX stock is 15.2% per year, what is its intrinsic value?
b. If IBX’s current market price equals this intrinsic value, what is next year’s expected price?
c. If an investor buys IBX stock now and plans to sell it after receiving the $2.15 dividend a year from now, what is the expected capital gain (i.e., price appreciation) in percentage terms? What are the dividend yield and the expected holding-period return? P-69
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ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus
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