Answer: $52.68.

## Explanation The Gordon growth model formula is: \[ V_0 = \frac{D_0 \times (1 + g)}{r - g} \] Where: - \( V_0 \) = intrinsic value per share - \( D_0 \) = current dividend per share = $2.00 - \( r \) = required return = 8% = 0.08 - \( g \) = sustainable growth rate First, we need to calculate the sustainable growth rate (g): \[ g = b \times ROE \] Where: - \( b \) = retention ratio = 1 - dividend payout ratio - ROE = return on equity = 9% = 0.09 Dividend payout ratio = 55% = 0.55 Retention ratio (b) = 1 - 0.55 = 0.45 \[ g = 0.45 \times 0.09 = 0.0405 = 4.05\% \] Now, calculate \( D_1 \): \[ D_1 = D_0 \times (1 + g) = 2.00 \times (1 + 0.0405) = 2.00 \times 1.0405 = 2.081 \] Apply the Gordon growth model: \[ V_0 = \frac{2.081}{0.08 - 0.0405} = \frac{2.081}{0.0395} = 52.6835 \] Rounded to two decimal places: $52.68 Therefore, the intrinsic value per share is closest to $52.68, which corresponds to option B. **Key points:** 1. The Gordon growth model requires the dividend in the next period (D₁) 2. The sustainable growth rate is calculated as retention ratio × ROE 3. The model only works when r > g (which is true here: 8% > 4.05%) 4. The result matches option B: $52.68

Author: LeetQuiz .