1. Calculate the stock’s intrinsic value according to the information below:

 

a. Stockholder’s required rate of return is 8.0%

 

b. The rate of growth in earnings and dividends in the first 2 years is 25%, the rate of growth in the next 2 years is 30%, and then 4% thereafter.

 

c. The last dividend paid by the company was $0.95

 

2. Calculate the stock’s intrinsic value according to the information below. If the current market price for the stock is $60.00, might you recommend buying shares of the stock based on the intrinsic value you calculated?

 

a. Stockholder’s required rate of return is 7.5%

 

b. The rate of growth in earnings and dividends in the first 4 years is 18%, the rate of growth in the next 2 years is 10%, and then 5% thereafter.

 

c. The last dividend paid by the company was $1.30

 

3. Calculate the stock’s intrinsic value according to the information below:

 

a. Stockholder’s required rate of return is 8.0%

 

b. The rate of growth is expected to be 3% every year

 

c. The last dividend paid by the company was $1.25

 

4. Calculate the stock’s intrinsic value according to the information below. If the current market price for the stock is $9.50, might you recommend buying shares of the stock based on the intrinsic value you calculated?

 

a. Stockholder’s required rate of return is 11%

 

b. The rate of growth is expected to be 5% every year

 

c. The last dividend paid by the company was $0.85

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