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Dividend Valuation Model XYZ, Inc. has recently reported earnings per share of $5. The company has a history of paying out 40% of earnings as

Dividend Valuation Model

XYZ, Inc. has recently reported earnings per share of $5. The company has a history of paying out 40% of earnings as dividends to shareholders. Additionally, XYZ has a book value per share of $20, and a required rate of return of 20%.

1. Compute the sustained growth rate for XYZ.

2. Compute the expected dividend per share for XYZ (i.e. D1).

3. Assume that XYZ grows at a constant annual rate equal to that which you computed in question 1. Compute the intrinsic value of XYZ

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