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The Duo Growth Company just paid a dividend of $1 per share

Finance

The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a rate of 25% over the 3 following years starting this year, and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. a) What is your estimate of the intrinsic value of a share of the stock now? b) If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? c) What do you expect its price to be 1 year from now? Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate?

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