Shares in Cochlear Ltd have been trading on the ASX for about 12 years. Over that time, the company has experienced a phenomenal growth rate in divided of about 25% p.a. This growth has been achieved by expanding into overseas market and, to a lesser extent, by new product development. You expected that growth in US sales will support the current growth in dividends for a further 5 years. After that time, you expected the dividend growth to slow to about 10% p.a. and the new growth rate to be maintained for the many years to come. Total dividend last year were 51 cents. The next dividend payment is due 6 months from now and dividends are paid semi-annually.
Required
What is the intrinsic value of a Cochlear share if your required rate of return is 16% p.a.?