Hi All,

I have an Internet Exercise assignment to complete.

It is in the book called "Financial Analysis with Microsoft Excel"(7TH EDITION) by Timothy R. Mayes

Chapter 8 Internet Exercise, page 261. I need to solve it from (a) to (c), not the rest of the question. It should be fairly easy for someone who is very good in the subject of Common Stock Valuation.

Could anyone help? Probably some of you might have already answered to this question from this book.

Thank you!

PS:

INSTRUCTIONS for Internet Exercise Assignment in Chapter 8:

Do parts a to c only.

Companies tend to increase their dividends once a year if they increase it at all. If you are using quarterly data, some of the growth will therefore be zero. In order to avoid this issue, you may want to use annual dividends, and compute the growth rate from those 5 numbers. I will leave it to you to decide whether to use quarterly or annual data in computing the growth rate. If you use quarterly, you will have to annualize the growth rate you computed because the constant growth formula will need an annual growth rate. If, despite using annual rates, your growth rate is still zero, then assume a zero growth rate for your company, or choose a different company to analyze.

Also, note that the growth rate must be less than the required rate of return. If it turns out to be greater, you will have to increase your required rate of return. For example, if Intels growth rate is 11% and the required rate of return is 10%, our constant growth dividend discount formula gives a negative current price! Change the 10% to a higher number, say 15%. I know it sounds arbitrary, and it is, and shows that there are many assumptions made when valuing a company. (A better method, but one I am not asking you to do, is to obtain the companys beta online, and compute its required rate of return using the CAPM.)