Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3.You are interested in BIGHEET stock. You try to calculate intrinsic value of BIGHEET stock using constant dividend grow model and corporate valuation model. BIGHEET

image text in transcribed 3.You are interested in BIGHEET stock. You try to calculate intrinsic value of BIGHEET stock using constant dividend grow model and corporate valuation model. BIGHEET recently paid a dividend, D0 of $2. It expects to grow 30% for three years followed by a constant growth rate. At year 4 , it expects that ROE is 10% and dividend payout ratio is 50%. Meanwhile, Free cash flows(FCF) are expected to be 11, 24.2, 40 million dollars for year1, 2, and 3 and are assumed to grow at a constant rate of 5% after year 3 . The other related information is as follows. (1) What is the intrinsic value per share of BIGHEET stock based on constant dividend growth model? (2) What is the intrinsic value per share of BIGHEET stock based on corporate value model? (3) If current stock price of BIGHEET is $55, make decision whether or not you buy the stock

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Concepts And Practice Of Mathematical Finance

Authors: Mark S. Joshi

1st Edition

0521823552, 9780521823555

More Books

Students also viewed these Finance questions