Each of two stocks, a and b, are expected to pay a dividend of $5 in the upcoming year. the expected growth rate of dividends is 10% for both stocks. you require a rate of return of 11% on stock a and a return of 20% on stock b. the intrinsic value of stock a

The intrinsic value of Stock A is 500

Explanation:

According to the DDM method the formula for calculating the intrinsic value of a stock is

Upcoming Dividend/Required rate of return - Growth rate of stock.

Upcoming Dividend of Stock A= 5

Required rate of return on Stock A= 11% or 0.11

Growth rate on stock A= 10% or 0.10

Intrinsic value of stock A=

5/(0.11-0.10)=5/0.01=500

The intrinsic value of Stock A is 500

answer; enforce the rules;

income statement is prepared in order to show the profits and loss of a business. in order to prepare the income statement she should collect all the income and expenses of the product with the cost of production.