In this exercise, you will find the present value of stock per share for 2 corpo

Question

In this exercise, you will find the present value of stock per share for 2 corporations using non-constant Dividend Growth Model. Please go to Yahoo! Finance and get the most recent quarterly dividend (d00 of the two corporations you have chosen before. If either of the corporations do not pay dividends, then choose a different corporation that pays dividend. To get historical dividends, go to 'historical prices' and choose 'dividends only'. Estimate quarterly dividends for the next 5 quarters using short-term dividend growth rate You can derive short-term growth rate using the average of last 5 quarters' growth In quarters, assume a long-term constant dividend growth rate which is 2% for both corporations. Assume a 12% annual discount rate for both the corporations for simplicity. Estimate the present value (fair value) of the stock per share for both corporations 2 Compare the present value with market price of the stocks and comment on whether the stocks are cheap or expensive.

Explanation / Answer

In this exercise, you will find the present value of stock per share for 2 corpo

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