On Fri, Apr 22, 2011 at 10:32 PM, Amra <bc070400699@vu.edu.pk> wrote:
a):
Dividend discount Model:
Alpha Corporation:
P0 = D0 (1+ g) / (R-g)
= 5 (1+0.03) / (0.12 - 0.03)
= 5 (1.03) / 0.09
= 5.15 / 0.09
= 57.2
Heller Corporation:
P0 = D0 (1+ g) / (R- g)
= 4 (1+ 0.05) / (0.12 – 0.05)
= 4 (1.05) / 0.07
= 60
b):
· Alpha Corporation's stock: 60 - 57.2 = 2.8. It is overvalued.
· Heller Corporation's stock: 58- 60 = 2. It is undervalued.
On Fri, Apr 22, 2011 at 7:05 PM, mc070400183 NIGAH NIZAR <mc070400183@vu.edu.pk> wrote:
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*Nigah-e-Nazar Fatimi*
0092-332-2332082
0092-305-2290080
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