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Stock's current intrinsic value

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WWW Servers just paid a dividend of D0 = $1.00. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on WWW's stock is 9.00%. What is the best estimate of the stock's current intrinsic value?

A. $31.50
B. $32.31
C. $33.14
D. $33.99
E. $34.84

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Solution Summary

Response helps in estimating the stock's current intrinsic value

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Dividend

Year Dividend
1 1.3 (30% growth )
2 1.43 (10% growth)
3 1.50 (5% growth)

From year 3 onwards, the dividends would be growing ...

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