Question
ABX Company recently paid a dividend of $1/ share. The dividend is expected to grow by 10% in year 1, 8% in year 2, 7%
ABX Company recently paid a dividend of $1/ share. The dividend is expected to grow by 10% in year 1, 8% in year 2, 7% in year 3, and 6% in year 4. After that, its dividend is expected to grow at 5% per year forever. If ABX Company's cost of capital is 10%, what is the intrinsic value of ABX's share?
If ABX's share currently trades at $18/ share, would you buy the share of ABX? Why?
| Cash flow (Div./ Price) | Year | Expected Div. | PV of Div. |
| D0 | 0 | ||
| D1 | 1 | ||
| D2 | 2 | ||
| D3 | 3 | ||
| D4 | 4 | ||
| Terminal Value (year 4) | 4 |
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Intrinsic Value of ABX Companys Share Based on the information provided we can calculate the intrins...
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Holt McDougal Larson Geometry
Authors: Ron Larson, Laurie Boswell, Timothy D. Kanold, Lee Stiff
1st Edition
0547315171, 978-0547315171
