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CFA Level 1
Equity Investments

Intrinsic Value Calculation Using DDM

Very Hard Equity Valuation Techniques Dividend Discount Models

Alice is analyzing a stock using the Dividend Discount Model (DDM) as part of her equity valuation process. She gathers the following information: the stock pays an annual dividend of $5 per share, and she expects that the dividend will grow at a rate of 6% per year indefinitely. Alice's required rate of return for the stock is 10%. What is the intrinsic value of the stock according to the Gordon Growth Model?

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