Sandata inc. recently paid its annual dividend of $3. dividends have consistently grown at a rate of 3%. you estimate that the stock has a required return of 17%. what is the intrinsic value of this stock?

In order to find the intrinsic value of a stock using the dividend discount method we need to know its growth rate, its last dividend and its required return. When we know these 3 things we can use them in the formula which is

Intrinsic Value = Dividend*(1+Growth Rate)/(Required return - Growth rate)

In this case we know all three of these values which are

D= 3

G= 3%

R= 17%

We will put these values in the formula in order to find the intrinsic value of the stock

3*(1+0.03)/(0.17-0.03)=22.07

The intrinsic value of the stock is $22.07

Explanation:

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