Calculate the stock price for your selected company using

  • Calculate the stock price for your selected company using the constant growth formula and the low-end dividend growth rate you determined in Part 1. Show all calculations for this estimated stock price using the low-end dividend growth rate.
    • For the required rate of return (r), use the following assumptions:
      • For a large capitalization company (greater than $10.0 billion in market capitalization) use 10.0%.
      • For a mid-cap company (between $2.0 billion and $10.0 billion in market capitalization) use 12.0%.
      • For a small-cap company (less than $2.0 billion in market capitalization) use 15.0%.
    • Show your calculations.
  • In a similar manner, calculate another estimate of the stock price for your selected company using the constant growth formula and the high-end dividend growth rate.
    • Use the same assumptions for the required rate of return (r) that you used for the low-end stock price, other than using the high-end dividend growth rate.
    • Show your calculations.
  • Compare each of the two stock prices you just calculated to the current stock price per share of the company.
    • State whether each constant growth stock price (low-end and high-end) is above or below the current price.
    • State whether each constant growth stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
  • Determine your concluded stock value, based on the two calculations using the constant growth formula.

Year

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Dividend Per Share

$0.94

$1.02

$1.12

$1.22

$1.32

$1.40

$1.48

$1.56

$1.60

$1.64

Annual Growth Rate

8.5%

9.8%

8.9%

8.2%

6.1%

5.7%

5.4%

2.6%

2.5%

Number of Years

10

5

3

Dividend Growth Average Per year

6%

4%

3%

Overall Dividend Growth

74%

17%

5%

 

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