- +1-530-264-8006
- info@tutorsglobe.com

Estimate of dg intrinsic value per share

Problem:

The Digital Growth Corp. Pays no cash dividends currently and is not expected to for the next 5 years. Its latest EPS was $10, all of which was reinvested in the company. The firm's expected ROE for the next 5 years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Afterward, the firm's ROE on new investments is expected to fall to 15%, and the company is expected to start paying out 40% of its earnings in cash dividends, which it will continue to do forever after. DG's market capitalization rate is 15% per year.

Q1. What is your estimate of DG's intrinsic value per share?

Q2. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? The year after?

Q3. What effect would if have on your estimate of DG's intrinsic value if you expected DG to pay out only 20% of earnings?

Now Priced at $25 (50% Discount)

Recommended **(96%)**

18,76,764

Questions

Asked

21,311

Experts

9,67,568

Questions

Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment2015 © Tutors Globe. All rights reserved.

## Q : Estimating the required rate of return problem

Which of the three models (dividend growth, CAPM, or APT) is the best one for estimating the required rate of return (or discount rate) of Under Armour?