Miltmar Corporation will pay a year-end dividend of $5, and dividends thereafter are expected to grow at the constant rate of 4% per year. The risk-free rate is 6%, and the expected return on the market portfolio is 14%. The stock has a beta of 0.88.
a. Calculate the market capitalization rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Market capitalization rate %
b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Intrinsic value $