La diversified inc. Recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3. 8%. The stock has a beta of 1. 29. The current risk-free rate is 2% and the market return is 10%. Assuming that capm holds, what is the intrinsic value of this stock?.

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02-08-2022
Business

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La diversified inc. Recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3. 8%. The stock has a beta of 1. 29. The current risk-free rate is 2% and the market return is 10%. Assuming that capm holds, what is the intrinsic value of this stock?.

Sagot :

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Tutorconsortium361 Tutorconsortium361 · Answer 1 · 2022-08-06T08:57:24-04:00

The intrinsic value of this stock is $300.

What is intrinsic value?

An asset's intrinsic value is often a value estimated using simple assumptions. For example, the intrinsic value of an option is based on the underlying instrument's present market value but overlooks the likelihood of future volatility and the time value of money.

For example, if the striking price of a call option is $19 and the market price of the underlying stock is $30, the call option's intrinsic value is $11. There are very few options that are worth less than what the option holder can receive if the option is exercised.

Intrinsic value is a basic, objective value found in an object, asset, or financial contract.

To know more about intrinsic value follow the link:

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Sagot :

What is intrinsic value?

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