Question
Part A A stocks next 2 dividends are as follows: $0.25 and $1.00. After that, the stock is expected to grow at a rate of
Part A
A stocks next 2 dividends are as follows: $0.25 and $1.00. After that, the stock is expected to grow at a rate of 4% indefinitely. The required return on this stock is 16%. Compute its fair market value.
Part B
A bond was issued 2 years ago. It's original maturity was 20 years. The coupon rate is 4% and the current YTM is 6%. Compute its intrinsic value.
Part C
A stock's next 2 dividends are expected to be $0.50 and $0.75, respectively. Afterwards, dividends are expected to grow at a constant rate of 4% per year indefinitely. The required return on this stock is 12% during the non-constant period and 10% afterwards. Compute its fair market value.
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