ou were hired as a new analyst to project the value of the ICER Company,...
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ou were hired as a new analyst to project the value of the ICER Company, a ew sustainable energy firm. oday is June 2 nd 2022 . The ICER Company just paid an annual lividend yesterday (on June 1st,2022 ) of $4.00 per share. You expect the company's dividend to grow at 15% for three years (2023,2024,2025). Following this, you expect the company to grow at a 10% rate for three years (2026,2027,2028). Finally, you expect the company to grow at a constant rate of 5% thereafter. The ICER Company. The company's equity beta is 2.0 , the risk-free rate is 3%, and the expected return to the market is 9%. Assume the CAPM holds. 1. According to CAPM, what is the appropriate discount rate? 2. What should the price per share of ICER be, according to the dividend discount model? (Hint: what is the present value of the future expected cashflows?) 3. If the current market value of the ICER Company is $88.88, what would you recommend? HOLD! It is fairly valued BUY! It undervalued SELL! It is overvalued There is not enough information
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