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The Duo Growth Company just paid a dividend of $5 per share. The dividend is expected to grow at a rate of 17% per year
The Duo Growth Company just paid a dividend of $5 per share. The dividend is expected to grow at a rate of 17% per year for the next 3 years and then to level off to 7% per year forever. You think the appropriate market capitalization rate is 10% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Omit the "$" sign in your response. Round your answer to 2 decimal places.) Intrinsic value per share $138.95 b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Omit the "%" sign in your response. Round your answer to 1 decimal place.) Expected dividend yield 2.53 % c. What do you expect its price to be 1 year from now? Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate? (Omit the "$" & "%" signs in your response. Round your answers to 2 decimal places.) Expected price Capital gain 7.47 %
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