Question
The High-Flying Corporation just paid a dividend of $2.25 per share on its common stock. Analysts estimate the dividend to grow at 22% per year
The High-Flying Corporation just paid a dividend of $2.25 per share on its common stock. Analysts estimate the dividend to grow at 22% per year for the next three years, then at 15% per year for 2 additional years, before finally converging to the industry average growth rate of 8% indefinitely. Treasury securities are currently yielding 3%, the market risk premium is estimated to be 7%, and the stock's beta is estimated to be 1.4. Calculate the intrinsic value of High-Flying Corporation's common stock.
Multiple Choice
Intrinsic Value = $121.57 Intrinsic Value = $126.98 Intrinsic Value = -$90.34 Intrinsic Value = $80.34
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