You are analyzing General Electric's common stock as a potential investment. You estimate that GE's dividends will
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Question:
- You are analyzing General Electric's common stock as a potential investment. You estimate that GE's dividends will grow at an average rate of 5.5% per year over the long term. GE's last dividend, (we assume, paid yesterday) was 2.50. You require a return of 13% to invest in GE stock. The current stock price is $38.
- What is your estimate of the stock's intrinsic value?
- What is your investment decision?
- that you believed that dividends would grow at 7% forever. What is your estimate of IV?
- What is your investment decision?
- Assume that g will be .055, but that the firm's risk is greater due to the worldwide recession, and that your required return is .15. What is the stock's IV?
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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