Intrinsic Value of the Stock Assignment

Interior Airline is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow at the rate of 10% per year. The risk-free rate of return is 4% and the expected return on the market portfolio is 13%. The stock of Interior Airline has a beta of 4.00. Using the constant growth DDM, the intrinsic value of the stock is _________.

1. $10,000
2. $22.73
3. $27.78
4. $41.67

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