The dividend payments for a listed company are expected to grow at 2% per year. The current dividend is $1 per share. Suppose the investors’ required rate of return is 5% per annum.
(a) Calculate the intrinsic price of the share.
(b) If the market price is $35 per share, would you buy shares in the company? Explain your answer.
The question belongs to Finance and it discusses about calculation of intrinsic price of share and whether or not one would buy the share for $35.
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