Estimating Intrinsic Share Value Using Dividend Discount Model

Estimating Intrinsic Share Value Using Dividend Discount Model

Mattel, Inc. is expected to pay a $1.48 dividend per share annually. Estimate its intrinsic value per common share using the dividend discount model (DDM) under each of the following separate assumptions.

(Assume that Mattel’<a title="s" href="m){i['GoogleAnalyticsObject']=r;i[r]=i[r]||function(){">s cost of equity capital is 8.0%.)

Required

1. The $1.48 dividend per share occurs at the end of each of the next three years, after which there are no additional dividend payments.

Round answer to two decimal places.

$Answer = 3.81

1. The $1.48 dividend per share occurs at the end of each year in perpetuity.

Round answers to two decimal places, if applicable.

$Answer = 18.5

1. The $1.48 dividend per share occurs at the end of each of the next three years, after which the dividends increase at a rate of 4% per year.

Round answers to two decimal places.

$Answer = 34.36

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