a. IBXs stock dividend at the end of this year is expected to be $2.15, and it

Question:

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

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

Question Posted: