,INV2601
EXAMPLE – THREE STAGE DIVIDEND MODEL
Maroon Limited has just paid dividends of R1.00 per share this year. The dividend is
expected to grow at 15% over the next two years and at 8% in year three. There
after growth is expected to level off to a constant growth of 4%. Maroon Limited has
a required rate of return of 18%. Calculate the intrinsic value of Maroon Limited
using the three stage dividend discount model.
R6.46
R9.25
R9.37
R10.61
SOLUTION
1.00
1.00 1.15 1.15
1.15 1.15 1.3225
1.3225 1.08 1.4283
1.4283 1.04 1.4854
1.4854
0.18 0.04
10.61
,
,
EXAMPLE – THREE STAGE DIVIDEND MODEL
Maroon Limited has just paid dividends of R1.00 per share this year. The dividend is
expected to grow at 15% over the next two years and at 8% in year three. There
after growth is expected to level off to a constant growth of 4%. Maroon Limited has
a required rate of return of 18%. Calculate the intrinsic value of Maroon Limited
using the three stage dividend discount model.
R6.46
R9.25
R9.37
R10.61
SOLUTION
1.00
1.00 1.15 1.15
1.15 1.15 1.3225
1.3225 1.08 1.4283
1.4283 1.04 1.4854
1.4854
0.18 0.04
10.61
,
,
