You are trying to estimate the intrinsic value of the shares of Flying High Ltd,...
70.2K
Verified Solution
Link Copied!
Question
Accounting
You are trying to estimate the intrinsic value of the shares of Flying High Ltd, a manufacturer of unmanned aerial vehicles, or drones. The company is headquartered in Melbourne, and sells its drones throughout Australia and New Zealand. It is a public company, but is not yet listed on the stock exchange. There are 30,000 shares outstanding. The most recent dividend was $2.6. The required rate of return for equity is 18.97%.
Book value of equity, per share, as at 31 December 2021 was $25.97. You have come up with the following forecasts:
- Earnings are expected to grow at 3.9% in perpetuity.
- The firm's Return on Equity is expected to remain constant at 23.46%.
What is the estimated value of the shares using a Residual Income Discount Model?
a. $33.71
b. $32.51
c. $31.68
d. $32.00
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
