2) (4 pts) What is your estimate of the intrinsic value of company YYY’s common stock today using a 3-year investment horizon? You expect YYY to pay a \$4.00 dividend at the end of next year and a \$4.30 dividend the following year (Year 2), and a \$5 dividend at the end of year 3. You expect YYY to sell for \$150 at the end of year 3 (The year 3 Horizon value is \$150). YYY has a required rate of return of 9%. Intrinsic Value Today = a) If YYY’s common stock is currently selling for \$110.25 today, would you consider it a good buy based on the information given? (Yes or No ) 2 ) (5 pts) You estimate that Co.

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A will have dividends of \$2.20 next year, \$2.60 per share in year 2. After year 2 the dividend is expected to grow at a constant rate of 4%. The required rate of return is 7.8%. a) What is your estimate for Company A’s stock price 2 years from today (Horizon Value)? Horizon Value in 2 years = \$_ b) What is your estimate for Company’s A’s intrinsic value today (don’t forget about the dividends)? Intrinsic Value today = c) IF the stock of Company A is selling for \$69, would you consider it a good buy ( Yes or No )?

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