All financial statement numbers are in millions of dollars unless otherwise indicated Assume today is 30th June 2017 and you have just been paid a dividend and that the next dividend will be received in exactly one year (assume dividend is paid annually) The stock price as at 30th June 2017 was $38 30 a) You expect Flight Centre Ltd to maintain the same dividend payout ratio as at 30th June 2017 for the next three years After three years, the company will increase the dividend payout ratio to 70 Assume companys return on new investment is 16 6 and the required rate of return is 10 Using the dividend discount model, calculate the intrinsic value for stock today (5 marks) b) BasedonyouranswerinPart(a),wouldyourecommendtobuy,sellorholdthestock Give the recommendation and briefly discuss the difference between the intrinsic value and stock price (no more than 200 words) (3 marks) FY 2010 06 30 2010 0 7 FY 2011 06 30 2011 0 84 FY 2012 06 30 2012 1 12 FY 2013 06 30 2013 1 37 In Millions of AUD except Per Share 12 Months Ending Dividends per Share Dividends per Share 5 Yr Geo Growth Dividend Yield Dividend Payout Ratio Cash Dividend Coverage Dividends Paid Total Cash Preferred Dividends Total Cash Common Dividends Trailing 12M Preferred Dividends Trailing 12M Common Dividends Trailing 12M Dividends Per Share 1 5634 49 9374 2 0025 25 9 3 7003 60 0536 1 6652 79 9 0 0 FY 2017 06 30 2017 1 39 4 4141 3 577 60 8399 1 6437 138 3 2 9748 55 9101 1 7886 117 3 FY 2014 06 30 2014 1 52 76 0031 3 2846 73 879 1 3536 146 8 0 0 152 9 FY 2015 06 30 2015 1 52 16 7748 4 4562 59 7343 1 6741 153 1 0 0 153 3 0 0 153 3 1 52 4 7015 56 008 1 7855 89 0 0 0 112 1 0 0 112 1 1 12 FY 2016 06 30 2016 1 52 12 5934 4 9715 62 7218 1 5943 158 4 0 0 153 4 0 0 153 4 1 52 0 0 0 0 0 01 0 0 69 8 0 0 69 8 0 7 0 0 84 0 0 84 137 6 0 0 137 6 1 37 140 4 0 0 140 4 1 39 152 9 1 52

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All financial statement numbers are in millions of dollars unless otherwise indicated. Assume today is 30th June 2017 and you have just been paid a

All financial statement numbers are in millions of dollars unless otherwise indicated.
Assume today is 30th June 2017 and you have just been paid a dividend and that the next

dividend will be received in exactly one year (assume dividend is paid annually).
The stock price as at 30th June 2017 was $38.30.

a) You expect Flight Centre Ltd. to maintain the same dividend payout ratio as at 30th June 2017 for the next three years. After three years, the company will increase the dividend payout ratio to 70%. Assume companys return on new investment is 16.6% and the required rate of return is 10%. Using the dividend discount model, calculate the intrinsic value for stock today.

(5 marks)
b) BasedonyouranswerinPart(a),wouldyourecommendtobuy,sellorholdthestock?Give the recommendation and briefly discuss the difference between the intrinsic value and stock price. (no more than 200 words) (3 marks)

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FY 2010 06/30/2010 0.7 FY 2011 06/30/2011 0.84 FY 2012 06/30/2012 1.12 FY 2013 06/30/2013 1.37 In Millions of AUD except Per Share 12 Months Ending Dividends per Share Dividends per Share - 5 Yr Geo Growth Dividend Yield Dividend Payout Ratio Cash Dividend Coverage Dividends Paid Total Cash Preferred Dividends Total Cash Common Dividends Trailing 12M Preferred Dividends Trailing 12M Common Dividends Trailing 12M Dividends Per Share 1.5634 49.9374 2.0025 -25.9 3.7003 60.0536 1.6652 -79.9 0.0 FY 2017 06/30/2017 1.39 4.4141 3.577 60.8399 1.6437 -138.3 2.9748 55.9101 1.7886 -117.3 FY 2014 06/30/2014 1.52 76.0031 3.2846 73.879 1.3536 -146.8 0.0 152.9 FY 2015 06/30/2015 1.52 16.7748 4.4562 59.7343 1.6741 -153.1 0.0 153.3 0.0 153.3 1.52 4.7015 56.008 1.7855 -89.0 0.0 112.1 0.0 112.1 1.12 FY 2016 06/30/2016 1.52 12.5934 4.9715 62.7218 1.5943 -158.4 0.0 153.4 0.0 153.4 1.52 0.0 0.0 0.01 0.0 69.8 0.0 69.8 0.7 0.0 84.0 0.84 137.6 0.0 137.6 1.37 140.4 0.0 140.4 1.39 152.9 1.52