
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
- 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
- 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
- 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