Current year dividend of sun ltd is rs 5 per share .expected growth rate is 8% and market capitalization rate is 10%.calculate the intrinsic value of stock?
a)5.4
b)67.5
c)54
d)270
Answers
Answered by
24
world of the sun is the rupees 5% share the accepted the growth rate is the 8% in the market capitalisation rate is the 10% calculate the Indian values will bus stop the 67.5 percent.
Answered by
1
The Answer is as follows:
Option (D) is correct.
Explanation:
Given that,
Current year dividend, D0 = Rs 5
Expected growth rate, g = 8%
Market capitalization rate, ke = 10%
Next year dividend, D1 = D0 × (1 + g)
= 5 × (1 + 0.08)
= 5.4
Intrinsic value of stock:
= D1 ÷ (ke - g)
= 5.4 ÷ (0.1 - 0.08)
= 5.4 ÷ 0.02
= Rs. 270
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