1. Go to Yahoo Finance, and search for MSFT (MSFT). Click on the historical Data tab, and pull the last 5 years of dividend (not stock price) data into excel. Calculate the yearly dividend payout using the trailing 12-months (does not have to correspond to calendar year).
2. What is the average the growth rate of the ANNUAL dividend from the previous 4 years?
3. If you use the dividend growth model, what should the price of the stock be if investors require an 18% return (using part a as your growth rate)? Or 15% return? Or 12% return?
4. What is the required rate that yields a price closest to the current trading price? (Please write the down the current price that MSFT is trading at when you solve this problem).
5. If you use the most recent annual growth rate (not the average calculated in part a), what is the required rate that yields a price closest to the current trading price?
6. If MSFT decides to not increase their dividend anymore, and keep it at $5 a year indefinitely, what is the price of the stock if investors require an 18% return?