You are John smith in this scenario:

John Smith is a junior financial analyst in the equity department of the Traveler Mutual Fund. His job is to analyze stocks assigned by the fund manager, Ben Ashford. Mr. Ashford assigned John to analyze the stock of DTE Energy. He asked John to estimate the intrinsic (fundamental) value of DTE Energy stock to help him decide whether the fund should buy, hold or sell DTE Energy stocks.

John recalled that he had learned the dividend growth model in his finance course to estimate the intrinsic value of a stock. To implement the dividend growth model, he first needed to know the current dividend payment of DTE Energy. Second, he needed to estimate the growth rate of dividends forever. Finally, he needed to estimate the required rate of return of the stock based on the risk level of the stock.

John next finished the following jobs:

Based on the info above, solve for:

1. Browsed Yahoo Finance and found the symbol for DTE Energy stock.

2. On Yahoo Finance, John checked DTE dividend payments for 2020 by assuming that the dividend payment each quarter in 2020 will be the same as that paid in the last quarter in 2019.

3. On Yahoo Finance, John also collected dividend payments from 1988 to 2019. He calculated the growth rate of dividends each year and then calculated the average and median growth rates over the periods. He first used the average growth rate as the estimate of the growth rate of dividends forever. He also used the median growth rate as the estimate of the growth rate of dividends forever.

4. Based on the risk level of DTE Energy stock, he estimated that the required rate of return of the stock was around 4.79%.

5. Based on the estimates he obtained from 2 through 4, John input the estimates to the dividend growth model to estimate the intrinsic values of the DTE Energy stock if the estimated growth rate of dividends is the average growth rate and median growth rate, respectively.

6. Since John knew that the estimated intrinsic value of a stock based on the dividend growth model is very sensitive to the estimated growth rate of dividends. Hence, he did the sensitivity analysis to see how the intrinsic value will be if the estimated growth rate changes.

7. Finally, he compared how intrinsic values could be different with the different estimated growth rate of dividends based on the average growth rate and the median growth rate.

Question:

1)estimate the intrinsic (fundamental) value of DTE Energy stock (Yahoo finance) using:

-the dividend growth model

-current dividend payment of DTE Energy

-estimate the growth rate of dividends forever

-estimate the required rate of return of the stock based on the risk level of the stock.

- Calculate the different estimated growth rate of dividends based on the average growth rate and the median growth rate