You have been recently hired an analyst for a JPMorgan, the advisor has asked you to value the stocks of General Electric (NYSE: GE) and General Motors (NYSE: GM). You are to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and have compiled the following data for the two companiesfor 2010 through 2017. GE GM Year EPS($) DPS(S) Payout Ratio EPS($) DPS($) Payout Ratio 2017 2.17 1.15 0.53 -68.45 1.00 -0.01 2016 1.99 1.03 0.52 -3.50 1.00 -0.29 2015 1.76 0.91 0.52 -18.50 2.00 -0.11 2014 1.61 0.82 0.51 4.94 2.00 0.40 2013 1.55 0.77 0.50 5.03 2.00 0.40 2012 1.51 0.73 0.48 3.35 2.00 0.60 2011 1.41 0.66 0.47 1.77 2.00 1.13 2010 1.27 0.57 0.45 6.68 2.00 0.30 For each of the stocks, explain whether the DDM is appropriate for valuing the stock. Provide quantitative and qualitative arguments supporting your position. 2. In your new role a equity analysts you have been tasked to examine the stock of British Airways (London Stock Exchange: BAY) as of the beginning of 2013. You notice that the consensus forecast by analysts is that the stock will pay a 4 dividend per share in 2014 (based on 21 analysts) and a 5 dividend in 2015 (based on 10 analysts). You expect the price of the stock at the end of 2015 to be 250. You have estimated that the required rate of return on the stock is 11 percent. Assume all dividends are paid at the end of the year. A. Using the DDM, estimate the value of BAY stock at the end of 2014. B. Using the DDM, estimate the value of BAY stock at the end of 2013. You have been recently hired an analyst for a JPMorgan, the advisor has asked you to value the stocks of General Electric (NYSE: GE) and General Motors (NYSE: GM). You are to evaluate the appropriateness of the dividend discount model (DDM) for valuing GE and GM and have compiled the following data for the two companiesfor 2010 through 2017. GE GM Year EPS($) DPS(S) Payout Ratio EPS($) DPS($) Payout Ratio 2017 2.17 1.15 0.53 -68.45 1.00 -0.01 2016 1.99 1.03 0.52 -3.50 1.00 -0.29 2015 1.76 0.91 0.52 -18.50 2.00 -0.11 2014 1.61 0.82 0.51 4.94 2.00 0.40 2013 1.55 0.77 0.50 5.03 2.00 0.40 2012 1.51 0.73 0.48 3.35 2.00 0.60 2011 1.41 0.66 0.47 1.77 2.00 1.13 2010 1.27 0.57 0.45 6.68 2.00 0.30 For each of the stocks, explain whether the DDM is appropriate for valuing the stock. Provide quantitative and qualitative arguments supporting your position. 2. In your new role a equity analysts you have been tasked to examine the stock of British Airways (London Stock Exchange: BAY) as of the beginning of 2013. You notice that the consensus forecast by analysts is that the stock will pay a 4 dividend per share in 2014 (based on 21 analysts) and a 5 dividend in 2015 (based on 10 analysts). You expect the price of the stock at the end of 2015 to be 250. You have estimated that the required rate of return on the stock is 11 percent. Assume all dividends are paid at the end of the year. A. Using the DDM, estimate the value of BAY stock at the end of 2014. B. Using the DDM, estimate the value of BAY stock at the end of 2013