Internet Exercise

1. Using the Yahoo! Finance Web site (finance.yahoo.com) get the current price and five-year dividend history for Intel. To gather this data, enter the ticker symbol (INTC) in the search box at the top of the page, and select Intel Corporation from the list. Record the current price from this page. Now, click on the Historical Data link. To get a table of previous dividends, select Dividends Only in the Show list, set the Time Period to five years prior to today's date, and click the Apply button. Click the Download Data link to download a file with this data. You may have the choice of either saving the file or opening it directly in Excel. It is easier to let it open in Excel. Otherwise, save the .csv (comma separated variables) file and then open it with Excel. It shouldn't need any further processing. You now have the dividends in a worksheet.

a. Because INTC pays dividends quarterly, for each quarter calculate the percentage change in the dividends. Now, calculate the compound quarterly growth rate of the dividends using the GEOMEAN function.

b. Now, annualize the quarterly dividend growth rate.

c. Calculate the intrinsic value of the stock using an 8% required rate of return and the calculated annual growth rate. Use the sum of the most recent four dividends as D0.

d. Now assume that INTC's dividend growth rate will remain the same for the next five years, and then fall to 75% of its current rate. What is the value of the stock using the two-stage dividend discount model