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Androscoggin Copper is increasing next year's dividend to $1.50 per share (DIV1). The forecast stock price next year is $105 (P1). Equally risky stocks of other companies offer expected rates of return of 10% (r). What is the intrinsic value (V0) of the stock?

Respuesta :

beritop1089

Answer:

$96.82

Explanation:

Use dividend discount model to solve for the stock value today (V0)

Formula;

V0 = (D1+P1) / (1+r)

where V0 = Current value

D1 = next year's dividend = $1.50

P1 = Next year's price = $105

r = rate of return = 10% or 0.10 as a decimal

Next, plug in the numbers to the formula;

V0 = (1.50+ 105) / 1.10

V0 = 106.5/ 1.10

V0 = $96.82

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