Question
The stock price of BCD Corporation is $20 per share. BCD Corporation is planning on paying its first dividend of $2 three years from today.
The stock price of BCD Corporation is $20 per share. BCD Corporation is planning on paying its first dividend of $2 three years from today. After that, dividends are expected to grow at 6% per year indefinitely. The stock's required return is 14%.
a) (10 points) What will the intrinsic value of BCD Corporation be three years from today?
b) (5 points) What is the intrinsic value of a share today?
c) (5 points) Should you be bullish or bearish towards BCD Corporation?
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Business Forecasting
Authors: John E. Hanke, Dean Wichern
9th edition
132301202, 978-0132301206
