) Firm Y is expected to experience a high growth of 40 percent per year...
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) Firm Y is expected to experience a high growth of 40 percent per year for the first three years, and tan to decrease to a sustainable growth rate of 5 percent theirafter. If the latest dividend payment is RM 3 and the required rate of return on the stock is 14%, estimate the intrinsic value of the stock today. Should an investor buy teh stock if its current market price is RM 64.50? Is it undervalued or overvalued? (6 marks)
(b) If teh period of supernormal growth rate is to last for a period of five years rather TEMPthan three years. Would its dividend yield be higher or lower in teh first three years? You may explain in words only. (4 marks)
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