Janet Ludlow's firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has valued QuickBrush Company at $63 per share. She now must value...


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Janet Ludlow's firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has<br>valued QuickBrush Company at $63 per share. She now must value SmileWhite Corporation.<br>a. Calculate the required rate of return for SmileWhite using the information in the following table:<br>December 2010<br>Quick Brush<br>SmileWhite<br>1.35<br>Beta<br>1.1<br>$30<br>$45.00<br>$63.00<br>Market Price<br>Intrinsic Value<br>Note: Risk-free rate 3.5%; expected market return 15.5%.<br>Instruction: enter your answer as a percentage rounded to 1 decimal place.<br>Required rate of return<br>b. Ludlow estimates the following EPS and dividend growth rate for SmileWhite:<br>First three years: 15% per year<br>Years thereafter: 13% per year<br>Estimate the intrinsic value of SmileWhite in December 2010 using the table above and the two-stage DDM. Dividends per share in<br>2010 were $1.<br>Instruction: enter your answer as a decimal number rounded to 2 decimal places.<br>Year<br>2010<br>Dividends<br>$1.00<br>$<br>$<br>$<br>$<br>2011<br>2012<br>2013<br>2014<br>$<br>Intrinsic stock value in 2013:<br>$<br>Intrinsic stock value in 201O:<br>

Extracted text: Janet Ludlow's firm requires all its analysts to use a two-stage DDM and the CAPM to value stocks. Using these measures, Ludlow has valued QuickBrush Company at $63 per share. She now must value SmileWhite Corporation. a. Calculate the required rate of return for SmileWhite using the information in the following table: December 2010 Quick Brush SmileWhite 1.35 Beta 1.1 $30 $45.00 $63.00 Market Price Intrinsic Value Note: Risk-free rate 3.5%; expected market return 15.5%. Instruction: enter your answer as a percentage rounded to 1 decimal place. Required rate of return b. Ludlow estimates the following EPS and dividend growth rate for SmileWhite: First three years: 15% per year Years thereafter: 13% per year Estimate the intrinsic value of SmileWhite in December 2010 using the table above and the two-stage DDM. Dividends per share in 2010 were $1. Instruction: enter your answer as a decimal number rounded to 2 decimal places. Year 2010 Dividends $1.00 $ $ $ $ 2011 2012 2013 2014 $ Intrinsic stock value in 2013: $ Intrinsic stock value in 201O:

Jun 05, 2022
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