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Two-stage dividend discount model

Problem: Using 2-stage DDM and CAPM to value stocks:

Beta of company: 1.15

Market price: $30

Intrinsic value: ?

Risk-free rate 4.50%

Expected market return: 14.5%

EPS and dividend growth rates for first 3 years: 12% per year

EPS and dividend growth rates thereafter: 9% per year

Estimate the intrinsic value oif the company using the data and the 2-stage dividend discount model.

Now Priced at $20 (50% Discount)

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