Problem:
LA Diversified Inc. recently paid its annual dividend ($3.00). Dividends have consistently grown at a rate of 3.80%. The stock has a beta of 0.88. The current risk-free rate is 2.40% and the market risk premium (RM - RF) is 8.50%.
Required:
Assuming that CAPM holds, what is the intrinsic value of this stock?
- $50.39
- $54.94
- $50.28
- $51.22
- $52.79
Note: Show supporting computations in good form.