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Intel recently reported earnings of $5.19 a share. Historically, Intel retained 73% of its earnings....

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Finance

Intel recently reported earnings of $5.19 a share. Historically, Intel retained 73% of its earnings. The required return on the stock is 10%. Intel is expected to grow its earnings by 8% for the next two years and then at a sustainable rate of 6%. (40-points total)

  1. Calculate the Fair value of the stock three years from today, in accordance with the constant growth Dividend Discount Model. (6-points)

  1. Calculate the fair value of the stock TODAY, in accordance with the constant growth Dividend Discount Model (8-points)

  1. Intel stock is currently trading in the market at $62.75. Given your answer in (b) above, is the stock correctly priced, over or under-valued? EXPLAIN (4-points)

  1. Given the Gordon Model, calculate the sustainable growth rate implied in the stock price of $62.75(8-points)

  1. Calculate the Stocks PVGO implied in the market price of $62.75 (8-points)

  1. For the sake of argument, we will state that growth companies derive over 30% of their stock value from PVGO. Would you consider Intel a growth company, EXPLAIN (6-points)

***Please solve without excel***

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