Question
Janet Ludlows firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has valued QuickBrush
Janet Ludlows firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has valued QuickBrush Company at $63 per share. She now must value SmileWhite Corporation.
CAPM = 0.255
a) Estimate the dividend value of SmileWhite in 2011 using the table above and the two-stage DDM. Dividends per share in 2010 were $1.
b) Estimate the dividend value of SmileWhite in 2012 using the table above and the two-stage DDM.
c) Estimate the dividend value of SmileWhite in 2013 using the table above and the two-stage DDM.
d) Estimate the dividend value of SmileWhite in 2014 using the table above and the two-stage DDM.
e) Estimate the intrinsic value of SmileWhite in December 2013 using the table above and the two-stage DDM. Dividends per share in 2010 were $1.
f) Estimate the intrinsic value of SmileWhite in December 2010 using the table above and the two-stage DDM.
Ludlow estimates the following EPS and dividend growth rate for SmileWhite: First Three years: 15% per year Years thereafter: 12% per year Ludlow estimates the following EPS and dividend growth rate for SmileWhite: First Three years: 15% per year Years thereafter: 12% per yearStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Institutions Management
Authors: Anthony Saunders, Marcia Cornett
8th Edition
0078034809, 978-0078034800
