Question: the current price of a company is 40share the dividends...
The current price of a company is $40/share. The dividends per share for years 1, 2, 3 and 4 are forecasted to be $1.0, 1.5, 2.0 and 2.5 respectively. Furthermore, analysts are forecasting EPS to go to $5.00 in four years. Similarly, the PE-multiple is estimated to be 18 in four years.
a) Find the expected return or IRR, the expected price return, the expected dividend return, Using a required rate of 12 %, find the intrinsic value, and finally, is the company undervalued?