2.

3
year Cash Flow P.V Value Pv Value of Cash Flow
1 5 0.909 4.545
2 8 0.826 6.608
3 12 0.751 9.012
4 15 0.683 10.245
5 16 0.621 9.936
Total Pv of cashflow 40.346

Buying Price 65
Dividned 2.5
Selling Price 78
k (Excpected returns) 0.12
n 1
PV of SP 69.64285714286
PV of D1 2.232142857143

Intrinsic value 71.875

Buying price 65
SP x
D1 2.5
k (er) 0.12
2.17391304347826
65=(2.50/1.15) + (x/1.15) 62.8260869565217
Selling Price 72.25
Year Dividens P.V Values Pv value of Dividends
1 3.5 0.893 3.1255
2 3.5 0.797 2.7895
3 4.5 0.712 3.204
4 4.5 0.635 2.8575
5 4.5 0.567 2.5515
5 85 0.567 48.195

ke 0.12 IV 62.723

Dividend D0 4
Growth Rate 0.08
K (er) 0.14

Dividend for next year D1 4.32

IV 72

Year Dividends PV of Dividends

1 2 1.75438596491228
2 3 2.3084025854109
V1 4.06

V2 66
P.V of V2 49.90548204159
IV 53.96827059191

Today's value End of 1st year End of 2 nd year

49.9 57.385 65.99275
Year Dividend PV value
0 2.75
1 2.97 2.48
2 3.21 2.23
3 3.46 2.00
4 3.74 1.80
5 4.04 1.62
V1 10.14

V2 28.2845654784
P.V of V2 11.3669325

Intrinsic Value 21.50

D0 4

D10 8.635699989091

7.05=4(1+g)^5
1.762=(1+g)^5
PV of selling price
D0 4

10th Year dividend is 8.64

7.05=4(1+g)^5
7.05/4=(1+g)^5
1.76=(1+g)^5
(1+g)=5sqrt1.76
1+g=1.12
g=1.12-1
g=0.12
12%
D0 2.75

Years Exp. Div. PV of Exp. Div.

1 2.97 2.48
2 3.21 2.23
3 3.46 2.00
4 3.74 1.80
5 4.04 1.62
V1 10.14

V2 11.37 `=(B8*1.05)/((0.2-0.05)*(1.2^5))

Intrinsic value 21.50 (10.14+11.37)

Year Exp. Div. PV of Exp. DIv.
1 2 1.74
2 3 2.27
V1 4.01

V2 66 `=3*(1.1)/(0.15-0.1) Alternative
PV of V2 49.91 `=B6/(1.15^2) 49.90548204159 `=3*1.1/((0.15-0.1)*(1.15^2))

Intrinsic value is PV of V1 and V2 53.91

Today's value end of 1st yr end of 2 yr

49.91 57.3965 66.005975
1/((0.15-0.1)*(1.15^2))
D0 4
k 0.14
g 0.08

D1 4.32 `=4*1.08

Instrinsic value 72 `=4.32/(0.14-0.08) `=4(1.08)/(0.14-.08)

Years Exp. Div. PV of Exp. Div.
1 3.5 3.13
2 3.5 2.79
3 4.5 3.20
4 4.5 2.86
5 4.5 2.55
5 85 48.23
62.76
D1 (Dividend) 2.5
P1 ( selling price) 78
k (Expected Return) 0.12
n ( number of years to be hold) 1
P0 (Buying Price) 65

Intrinsic value
PV of D1 2.23214285714286 2.232142857143
PV of P1 69.6428571428571
IV 71.875

as the current market price is less than the intrisic value, we recommend to buy.

D1 2.5
P1 x
k 0.15
n 1
P0 65

Intrinsic value
PV of D1 2.17391304347826
PV of P1 x/1.15

65=(2.50/1.15)+ (X/1.15) B.P - P.V of D1= PVof S.P

65= 2.17 + (X/1.15)
65-2.17=(X/1.15)
62.83= (X/1.15)
X= 62.83*1.15
X (S.P) 72.2545
2.5 * (1/1+r)^n (reference for pv value)
year Cash Flow PV of Cash flow
1 5 4.55 `=B2/(1.1)^A2
2 8 6.61
3 12 9.02
4 15 10.25
5 16 9.93
40.35