The Duo Growth Company just paid a dividend of $2.2 per share. The dividend is expected to grow at a rate of 19% per year for the next 3 years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 26% per year.
a. What is your estimate of the intrinsic value of a share of the stock? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Intrinsic value per share $
b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
Expected dividend yield %
c-1. What do you expect its price to be 1 year from now? What is the implied capital gain? (Round your answers to 2 decimal places. Omit the "$" & "%" signs in your response.)
Expected price $
Capital gain %
c-2. Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate?
Yes
No