| EPS | 40.10 |
| DPS | 25.00 |
| Discount Rate | 10% |
(1) You think that company A is now in the mature phase and you do not expect any growth of its earnings from now on. What is the fair price per share of company A based on its latest EPS?
Assumption: The dividend and eps have no growth at all. And the intrinsic value of a stock based on Dividend Discount Model (DDM) will be the Present Value of all future dividend.
| Intrinsic Value | 2.500 |
(2) As company A pays regular and growing dividend for the past years, you want to value company A based on a constant growth of dividend of 5% for the rest of its economic life. What is the fair price of stock A based on the constant dividend growth model (Gordon growth model)?
| Intrinsic Value | 5.000 |
(3) You foresee that company A will be growing for the next 5 years and its dividend will grow accordingly too. To be prudent, you assume that the EPS and DPS will continue to grow at 8.9%, the growth rate of EPS for the next 5 years, and then 5% subsequently.
| 1 | 2 | 3 | 4 | 5 | 6 | |
| DPS | 27.225 | 29.648025 | 32.28669923 | 35.16021546 | 38.28947463 | 804.0789673 |
| PV | 24.75 | 24.5025 | 24.257475 | 24.01490025 | 23.77475125 | 453.8816147 |
| Intrinsic Value | 5.75 |
(4) You are now thinking about investing in stock A for 5 years and sell it at the end of the fifth year. Assuming dividend grows for the first 5 years as question 3 above at 8.9% and at the end of 5 years; you are able to sell the stock at a price 15 times its earnings. What is the intrinsic value?
| 1 | 2 | 3 | 4 | 5 | |
| DPS | 27.225 | 29.648025 | 32.28669923 | 35.16021546 | 38.28947463 |
| PV for DPS | 24.75 | 24.5025 | 24.257475 | 24.01490025 | 23.77475125 |
| EPS | 43.6689 | 47.5554321 | 51.78786556 | 56.39698559 | 61.41631731 |
| Stock Price @ end of 5th year | 9.212447596 | ||||
| Stock Price @ today value | 5.72020515 | ||||
| Intrinsic Value | 6.933 |
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