Name : Uzair Khan

Student ID : MC210204649
Subject : MGT 201

Answer:
Part A:

The dividend policy used by each company are given below:

1. Company A uses “Non growth policy”.

2. Company B uses “Two stage growth model”.
3. Company C uses “Constant growth model”.

Part B:

Company A:
Now we have to calculate its Present Value

Year 1 = = = =8.06

Year 2 = = = =10.29/1.35 = 7.62

Year 3 = = = =11.31/1.56=7.25
V1 =8.06+7.62 +7.25
V1 = 22.93
Calculation of V2

Now taking the present value

Adding both values

=V1+V2
=22.93+49.23
V=71.86
Conclusion:
MP=98
Intrinsic value=71.86
It is over-valued and it should not be purchased.
Company C:
Given Values:
Par Value = Rs.20
Market Price = Rs.32.5

Last Year Dividend Price = = Rs.2 per share

Rate of return = 18% = 0.18
Growth Rate = g = 10% = 0.10
This is a Constant growth model.
Formula:
Part C:
1. Company A is in Under valued
2. Company B is in Over valued
3. Company C is in Over valued