1) (4 pts) What is your estimate of the intrinsic value of company ZZZ's common stock today using a 1- year investment horizon? You expect ZZZ to pay a $3.10 dividend at the end of next year and you expect ZZZ to sell for $90 at the end of next year. ZZZ has a required rate of return of 8.2% 3.10 N- 1.8.2 FU=93.1 PMT=0 PV=86.04 93.10 Intrinsic Value Today = _ 86.04 If ZZZ's common stock is currently selling for $87 today, would you consider it a good investment based on the information given? (Yes or No) NO because the intrinsic value is not more than the What is the expected return for ZZZ based on your estimates if Zzz is selling for $87 today? 7.01% Selling price 2) (4 pts) What is your estimate of the intrinsic value of company YYY's common stock today using a 3- year investment horizon? You expect YYY to pay a $2.00 dividend at the end of next year and a $2.20 dividend the following year (Year 2), and a $2.50 dividend at the end of year 3. You expect YYY to sell for $85 at the end of year 3. YYY has a required rate of return of 9%. 1/1*(1+.09)132.7722 1.83 12 =.8417 1.85 n =.9174 1.93 85x.7722 Intrinsic Value Today = _71.24 (= 65.63 If YYY's common stock is currently selling for $68 today, would you consider it a good investment based on the information given? (Yes or No) yes because the intrinsic value is greater than the selling price What is the expected return for YYY based on your estimates if YYY is selling for $68 today? MORE on BACK