Estimating Intrinsic Share Value Using Dividend Discount Model

Mattel, Inc. is expected to pay a $1.52 dividend per share annually. Estimate its intrinsic value per common share using the dividend discount model (DDM) under each of the following separate assumptions. (Assume that Mattel's cost of equity capital is 8.0%.)

Required

a.The $1.52 dividend per share occurs at the end of each of the next three years, after which there are no additional dividend payments.

b.The $1.52 dividend per share occurs at the end of each year in perpetuity.

c.The $1.52 dividend per share occurs at the end of each of the next three years, after which the dividends increase at a rate of 4% per year.