Ask Question
BusinessBusiness
25 November, 05:47

Seaside Toys currently earns $2.00 per share and currently pays $1.00 per share in dividends. It is expected to have a constant growth rate of 5 percent per year. The required rate of return is 15 percent. What is the intrinsic value of this stock

+1
Answers (1)
  1. 25 November, 06:13
    0
    The intrinsic stock value is $10.5

    Explanation:

    The inherent value of any other assets or a share of which an investor is expected to have. differences between the dividend discount method (DDM) and the current price is used to evaluate intrinsic value.

    The known formula for the Gordon Growth version of the DDM which focused on dividends is given below,

    The Intrinsic Price of Stock = D1 / (r - g)

    Let recall the values,

    D1 = The Dividends after one year from the now

    r = The Required rate of return

    g = The Growth rate of dividends

    Then,

    The Intrinsic Price of Stock = $1 (1 + 5%) / (15% - 5%)

    Intrinsic Price of Stock = $10.5
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Seaside Toys currently earns $2.00 per share and currently pays $1.00 per share in dividends. It is expected to have a constant growth rate ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
You own 400 shares of Western Feed Mills stock valued at $51.20 per share. What is the dividend yield if your annual dividend income is $352? A. 1.68 percent B. 1.72 percent C. 1.83 percent D. 1.13 percent E. 1.21 percent
Answers (1)
Economists usually call an industry an oligopoly if A. there is one firm that produces 100 percent of the output B. the ten largest firms produce less than 50 percent of the output C. only one product is available on the market D.
Answers (1)
Tom rented an apartment from margaret on a month-to-month basis, with rent due on the first of the month. this type of tenancy is known as a "tenancy at will."true or false
Answers (1)
Which of these types of buildings would not be found on the plaza principal? municipal buildings family homes cathedrals?
Answers (1)
Which of the following would you list as a non-essential expense? a. a fashionable pair of blue jeans. b. electricity for your home. c. insurance on your car. d. a bill for data usage on a smart phone.
Answers (1)
New Questions in Business
Friendly's Quick Loans, Inc., offers you "eight for ten or I knock on your door." This means you get $8 today and repay $10 when you get your paycheck in one week (or else).
Answers (1)
Shoeleather costs arise when higher inflation rates induce people to:a. spend more time looking for bargains. b. spend less time looking for bargains. c. hold more money. d. hold less money.
Answers (1)
Lewis Inc. had the following information taken from various accounts for 2015: Sales Discounts $41,000 Unearned Revenue $32,000 Total Sales $459,000 Purchase Discounts $15,000 Sales Allowances $35,000 Accounts Receivable $205,000 What was Lewis Inc.
Answers (1)
True or False: The basic economic theory of supply and demand suggests that when price drops, consumers will buy more and thus generate stronger demand.
Answers (1)
If you think carefully about what you're doing, always ask for advice when you need it, and keep asking questions, starting a business can be
Answers (2)
Home » Business » Seaside Toys currently earns $2.00 per share and currently pays $1.00 per share in dividends. It is expected to have a constant growth rate of 5 percent per year. The required rate of return is 15 percent. What is the intrinsic value of this stock
Sign Up Forgot Password?