What is the intrinsic value of stock C in the following statement? - ProProfs Discuss
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# What is the intrinsic value of stock C in the following statement?

You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks is expected to pay a dividend of \$2 in the upcoming year. Thee expected growth rate of dividends is 9% for stock C and 10% for stock D.

Asked by Kaushalmandalia, Last updated: Sep 08, 2023

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1 Answer

#### kaushalmandalia

Kaushalmandalia

Answered Feb 26, 2018

Will be less than the intrinsic value of stock D

PV0 = D1/(k-g); given that dividends are equal, the stock with the higher growth rate will have the higher value.

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