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Assume Target Corp just paid a dividend of $2.72 this past year. Also assume that...

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Accounting

Assume Target Corp just paid a dividend of $2.72 this past year. Also assume that Target dividend is expected to grow at 15% in the next four years. After that, the growth rate in dividends is expected to level off to a perpetual 6%. Finally, assume that the cost of equity for the stock of Target is estimated at 8%. Given these assumptions, what is the estimated value of the stock of Target? If the stock trades at $230 in the stock market, would you consider the stock undervalued or overvalued?
$252.20; undervalued
$198.09; overvalued
$252.20; overvalued
$237.86; overvalued
$237.86; undervalued
$198.09; undervalued

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