Question
Pick a stock. That stock should have a track record for paying Dividends for at least 7years. ( The stock I pick is Nucor Corp
Pick a stock. That stock should have a track record for paying Dividends for at least 7years. ( The stock I pick is Nucor Corp ) 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 return 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.
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