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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
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
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