Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pick a stock. That stock should have a track record for paying Dividends for at least 7 years. In the process of calculating the intrinsic

image text in transcribed
Pick a stock. That stock should have a track record for paying Dividends for at least 7 years. In the process of calculating the intrinsic value of this stock. Complete the following a. Expected dividend next year b. Dividend Growth Rate c. Required rate od retum for this stock Dividend information is available in Finance.yahoo.com under Historical prices Required rate of return has to be calculated by using CAPM Explain all Assumptions. Give Sources to all facts. Risk Free rate can be 10 year T-Bond rate. If you choose a different one, then give reasons Expected return on Stock market can be Long term rate of return on S\&P Index. Currently about 10.5%. You may use a different rate should you choose it Beta of the stock needs to be calculated. Use daily return on stock as Y variable, Return on S\&P as X variable and calculate Slope and this is Beta. Use daily return / Monthly return for between 5 and 10 years to calculate Beta. Once you have this, apply Dividend Growth Model to calculate stock price. Caution: The Model will not work if the stock you pick had Dividend growth over long term more than required rate of return

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technical Analysis Of The Financial Markets

Authors: John J. Murphy

1st Edition

0735200661, 978-0735200661

More Books

Students also viewed these Finance questions

Question

What does a statechart diagram depict?

Answered: 1 week ago

Question

Summarize the impact of stress on physical well-being.

Answered: 1 week ago

Question

What is the purpose of the application form?

Answered: 1 week ago

Question

What is the general purpose of preliminary screening?

Answered: 1 week ago