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QUESTION
Amalgamated Aircraft Parts, Inc. is expected to pay a dividend of $1.50 in the coming year. The required rate of return is 16%, and dividends are...
Amalgamated Aircraft Parts, Inc. is expected to pay a dividend of $1.50 in the coming year. The required rate of return is 16%, and dividends are expected to grow at 7% per year. Using the dividend valuation model, find the intrinsic value of the company’s common shares.
SolutionThe intrinsic value of Amalgamated Aircraft Parts, Inc. can be calculated using the dividend valuationmodel:Value per share = $1.50$1.50 $16.670.16 0.07 0.09 Where 16% is the desired...