3. What is the intrinsic value of a share of stock if expected dividends are $8/share and the expected priceyear is $90/share? Assume a discount rate of 10%. What is the expected return and what shouldbe the decision from an investor?.in 1

Intrinsic Value is the expected or anticipated value of a stock based on the fundamental analysis.…

3. What is the intrinsic value of a share of stock if expected dividends are $8/share and the expected price in 1 year is $90/share? Assume a discount rate of 10%. What is the expected return and what should be the decision from an investor?..

3. What is the intrinsic value of a share of stock if expected dividends are $8/share and the expected price in 1 year is $90/share? Assume a discount rate of 10%. What is the expected return and what should be the decision from an investor?..

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section7.4: Valuing Common Stocks

Problem 3ST

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

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3. What is the intrinsic value of a share of stock if expected dividends are $8/share and the expected price
year is $90/share? Assume a discount rate of 10%. What is the expected return and what should
be the decision from an investor?.
in 1

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