Go to www.dividenddiscountmodel.com and enter ONE (for Bank One) as the ticker symbol. You can enter a
Question:
Go to www.dividenddiscountmodel.com and enter ONE (for Bank One) as the ticker symbol. You can enter a required return in the Discount Rate box and the site will calculate the stock price using the dividend discount model. If you want an 11 percent return, what price should you be willing to pay for the stock? At what required return does the current stock price make sense? You will need to enter different required returns until you arrive at the current stock price. Does this required return make sense? Using this market required return for Bank One, how does the price change if the required return increases by 1 percent? What does this tell you about the sensitivity of the dividend discount model to the inputs of the equation?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan