Answered step by step
Verified Expert Solution
Question
1 Approved Answer
What is the answer to question D? Problem 18-17 The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected
What is the answer to question D?
Problem 18-17 The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 22% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 17% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete and correct. Intrinsic value per share 13.18 EA b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete and correct. Expected dividend yield % 9.26 c. What do you expect its price to be one year from now? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete and correct. Expected price $ 14.21 d-1. What is the implied capital gain? (Do not round intermediate calculations. Round your final answer to 1 decimal place.) Answer is complete but not entirely correct. Implied Capital Gain 17.1 % d-2. Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate? Yes NoStep 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