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Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. 12) Investors expect the stock to sell for $46 a share one year from now. What is the intrinsic value of this stock if the dividend payout ratio is 40% and the discount rate is 13.5%?
A) $38.19
B) $42.63
C) $45.77
D) $40.53

Respuesta :

jepessoa

Answer:

B) $42.63

Explanation:

To determine the value of AB stock we must find the present value of the cash flow for next year:

total cash flow for next year = $46 (selling price) + $2.38 (= $238  / 100 shares) = $48.38

present value = $48.38 / (1 + 13.5%) = $48.38 / 1.135 = $42.63

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