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An analyst estimated the following information regarding Trident Company Ltd. Current share price: Rs 150 Recent dividend/share: Rs 40 Earnings / share: Rs 10 Return

An analyst estimated the following information regarding Trident Company Ltd. Current share price: Rs 150 Recent dividend/share: Rs 40 Earnings / share: Rs 10 Return on Equity: 32% Required Rate of Return: 23% Answer the following:

a. Use the Gordons Model to Estimate the Intrinsic value of the stock. Based on the intrinsic value, is the company overvalued, undervalued or fairly valued?

b. Calculate the Intrinsic value, if the growth rate is lowered to 20% and the new required rate of return is 18%.

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