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CFA Level 2
Equity Investments

Intrinsic Value Calculation Using Gordon Growth Model

Medium Equity Valuation Applications Discounted Dividend Valuation

XYZ Corporation is currently paying an annual dividend of $2.00 per share. The company has a consistent historical growth rate of dividends at 5% per year. Analysts expect this growth rate to persist indefinitely.

Using the Gordon Growth Model, what is the intrinsic value of XYZ's stock if the required rate of return for equity investors is 10%?

Hint

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