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You are analyzing the stock of Ansell Limited (Australian Stock Exchange: ANN), a healthcare company, as of late June 2008. The stock price is A $ 9.74. The company’s dividend per share for the fiscal year ending 30 June 2008 was A $ 0.27. You expect the dividend to increase by 10 percent for the next three years and then increase by 8 percent per year forever. You estimate the required return on equity of Ansell Limited to be 12 percent.

A. Estimate the value of ANN using a two-stage dividend discount model.

B. Judge whether ANN is undervalued, fairly valued, or overvalued.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92714740

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