Thursday

November 27, 2014

November 27, 2014

Posted by **Wong** on Thursday, October 11, 2007 at 5:21am.

Ltd using the dividend discount model (DDM). He gathers the following information:

• CL3’s earnings are expected to grow 17% per year over the next three years before

stabilizing at an annual growth rate of 9%.

• CL3 paid cash dividend of $22,470 this year.

• Number of outstanding shares: 13,000.

• CL3 Ltd will maintain the current dividend payout ratio.

• CL3’s beta is 1.25.

• The government bond yield is 6%.

• The market equity risk premium (i.e. rm - rf) is 5%.

a) Calculate the value of a share of CL3’s common stock using the two-stage DDM.

b) Market price is $75 per share. Based on answer in (a), what would the Fund Manager do ?Why ?

- maths -
**bobpursley**, Thursday, October 11, 2007 at 8:05amElain, Ming, Wong: We dont do homework for you. If you show thinking or work, we will generally critique it.

**Answer this Question**

**Related Questions**

Accounting Multiple choice - ACON lTD ACQUIRES THE ASSETS AND ASSUMES THE ...

maths-urgently needed - Atul invested Rs 75000 in buying Rs 200 shares of ABC ...

maths-urgently needed ,plse - Atul invested Rs 75000 in buying Rs 200 shares of ...

FINANCE - Gamma Ltd is not expecting to pay dividends for three years, at the ...

FINANCE - Gamma Ltd is not expecting to pay dividends for three years, at the ...

accounting - In its first year of operations Tower Ltd purchased and paid for ...

math - Dynacan Ltd. manufactured 10,000 units of product last year FC= 22,200,...

MBA Executive : Banking & Finance - Following are the financial statements for ...

Capital Investment and Financing Decisions. - 1)Find the present value of Rs. 2...

Taxation - "Sally W. Emanual had the following dividends and interest during the...