http://intrinsicvaluespm.yolasite.com/
For option A, just put Growth = 0%. Also put 0 for EPS, 10% for the discount rate, $10 for the dividend.
For option B you need to run the calculation using Growth = 4%, Dividend = $5, EPS would also need to be at least $5 to cover the dividend payment - discount rate is still 10. That would do the trick right there!
Of the course the problem might want you to use the Gordon Growth Model instead, but the ultimate decision will be the same.
Stock A is worth $100. For stock B, I figured the present value of all future dividends discounted to the present at 10 percent, and after 100 years the stock is still worth only about $83.
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The opportunity cost of capital ( also known as the market capitalization rate ) is 10%. Which stock has greater value?
a.) Stock A is expected to provide a dividend of $10 a share forever.
b.) Stock B is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 4% a year forever.
