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You want to earn a return of 10% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends is 6% for stock A and 5% for stock B. Using the constant-growth DDM, the intrinsic value of stock A _________.

Respuesta :

The intrinsic value of stock A is $100.

What is the intrinsic value of the stock?

The intrinsic value of a stock is the real or true value of the stock when the dividend paid, growth rate and discount rate is taken into account.

Intrinsic value = dividend paid next year / (rate of return - growth rate)

$4 / (10% - 6%)

$4 / 4%

= $4 / 0.04 = $100

To learn more about how to determine the value of a stock, please check: https://brainly.com/question/15710204

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