Question

1.     IMC paid a dividend of $1.60 on its common stock yesterday. The dividends are expected to grow at 6% per year indefinitely. If the 10-year Treasury bond yield is 3%, IMC stock beta is 12, and market rate of return is 11%, estimate the value of IMC stock 3 years from now.

Answer 1

$$1.6\times(1+0.06)^3=1.9$$

$$12\times(1+0.11)^10=34.1$$

$$34.1+1.9=36$$