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Stocks and Intrinsic Value

The Window corporation recently paid a $3 dividend, and is expected to grow at 5% forever. Investors generally require an expected return of at least 9% before they'll buy stocks similar to Window.

a. What is Window's intrinsic value?
B. Is it a bargain if it's selling at $76 a share ?

Solution Preview

a. What is Window's intrinsic value?
D = 3, g =5% and K = 9%
By using DDM model, ...

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