Final answer:
The expected dividend in 8 years for Inuro A stock can be calculated by applying an 8% growth rate for the first four years and adjusting the growth rate down to 2% by the eighth year. The intrinsic value of the stock in 8 years can be found using the Gordon Growth Model. To calculate the intrinsic value now, we add the present value of expected dividends and the discounted intrinsic value at year 8.
Step-by-step explanation:
To calculate the expected dividend in 8 years for Inuro A stock, we must apply the changing growth rates to the initial dividend amount. The dividend grows at 8% annually for 4 years and then decreases by 1.5% each year from years 5 to 8, leveling off at a 2% growth rate perpetually. Since the last known dividend is $1.6, we can calculate the dividends for the first four years using the initial growth rate of 8%. In year 4, the dividend will be $1.6 × (1 + 0.08)^4. To find the dividend in year 8, we would then decrease the growth rate each year until it reaches 2%. The intrinsic value of the stock in 8 years can be determined using the Gordon Growth Model, where the value is equal to the dividend at year 8 (D8) divided by the difference between the required rate of return (k) and the perpetual growth rate (g): V8 = D8 / (k - g). To find the intrinsic value of the stock now, we would calculate the present value of all expected dividends up to year 8, and then add the present value of the stock's price in year 8, which is its intrinsic value at that time discounted back to the present.