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according to discount dividend model,please calculate the intrinsic value for stock today,now is 2015 stock today.now...

according to discount dividend model,please calculate the intrinsic value for stock today,now is 2015 stock today.now the stock price is 38.3,roe is 16.6%,required return is 10%,dividend is 1.39.DPR is 60.8339.In 2016, dividend is 1.547,DPR is 60.9294,in 2017, dividend is 1.695,DPR is 61.1693.assume that the DPR will increase to 70% in 2018.
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Answer #1
year earnings dpr dividend df @ 10% pv
2015(today) 2.28491 60.8339 1.39 0.909091 1.263636
2016 2.539004 60.9294 1.547 0.826446 1.278512
2017 2.770998 61.1693 1.695 0.751315 1.273479
3.815627

In 2018, DPR=70%.

Expected earnings in 2018= 2.770998*1.1=3.0480978

Dividend= 3.0480978*70%= 2.13

Growth= retention* return on equity

Retention= 1- DPR=1-0.7=0.3

Return on equity=16.6%

Growth= 0.3*16.6%= 0.05 that is 5%.

Required return=10%

Terminal value= (2.13*1.05)/(0.10=0.05)=44.73

PV of terminal value= 44.73/(1.1)3=33.61

Intrinsic value of stock today= 33.61+3.81= $37.42

Since intrinsic value is less than price, stock is overpriced and should be sold.

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