Using the constant growth formula, calculate the value of each stock. Thanks in
ID: 2646055 • Letter: U
Question
Using the constant growth formula, calculate the value of each stock.
Thanks in advance.
Rating
Stock Price
Total 2003 Dividends
5 Year Dividend Growth
Beta
1
$12.05
$0.95
0.65%
0.65
2
$28.02
$0.00
-100.00%
2.3
3
$17.75
$0.00
0.00%
1.89
4
$92.45
$1.30
6.25%
1.2
5
$63.79
$0.75
0.95%
1.35
6
$71.11
$6.00
5.00%
.67
7
$10.00
$0.00
0.00%
1.78
8
$49.51
$0.68
0.75%
0.95
9
$101.00
$5.00
0.38%
0.92
10
$39.78
$0.00
-90.00%
1.5
11
$29.75
$2.00
2.25%
0.85
12
$73.09
$0.00
-1.00%
0.38
13
$20.39
$6.00
5.25%
0.71
14
$18.25
$1.00
8.00%
1
15
$7.00
$1.35
8.85%
0.73
Treasury Bond Rate
4.30%
Return on the Bond Market
11.90%
Rating
Stock Price
Total 2003 Dividends
5 Year Dividend Growth
Beta
1
$12.05
$0.95
0.65%
0.65
2
$28.02
$0.00
-100.00%
2.3
3
$17.75
$0.00
0.00%
1.89
4
$92.45
$1.30
6.25%
1.2
5
$63.79
$0.75
0.95%
1.35
6
$71.11
$6.00
5.00%
.67
7
$10.00
$0.00
0.00%
1.78
8
$49.51
$0.68
0.75%
0.95
9
$101.00
$5.00
0.38%
0.92
10
$39.78
$0.00
-90.00%
1.5
11
$29.75
$2.00
2.25%
0.85
12
$73.09
$0.00
-1.00%
0.38
13
$20.39
$6.00
5.25%
0.71
14
$18.25
$1.00
8.00%
1
15
$7.00
$1.35
8.85%
0.73
Treasury Bond Rate
4.30%
Return on the Bond Market
11.90%
Explanation / Answer
Calculation of Value of stock using Dividedn growth model Rating Stock Price Total 2003 Dividends 5 Year Dividend Growth Expected Dividend (D1) Beta Market rate Risk Free rate Ke =RF+ B * (M-RF) Value of Stock D0 g D1 = D0 * (1+g) B M RF Ke D1 /(ke-g) 1 $ 12.05 $ 0.95 0.65% $ 0.96 0.65 11.90% 4.30% 9.24% $ 11.13 2 $ 28.02 $ - -100.00% $ - 2.30 11.90% 4.30% 21.78% $ - 3 $ 17.75 $ - 0.00% $ - 1.89 11.90% 4.30% 18.66% $ - 4 $ 92.45 $ 1.30 6.25% $ 1.38 1.20 11.90% 4.30% 13.42% $ 19.26 5 $ 63.79 $ 0.75 0.95% $ 0.76 1.35 11.90% 4.30% 14.56% $ 5.56 6 $ 71.11 $ 6.00 5.00% $ 6.30 0.67 11.90% 4.30% 9.39% $ 143.44 7 $ 10.00 $ - 0.00% $ - 1.78 11.90% 4.30% 17.83% $ - 8 $ 49.51 $ 0.68 0.75% $ 0.69 0.95 11.90% 4.30% 11.52% $ 6.36 9 $ 101.00 $ 5.00 0.38% $ 5.02 0.92 11.90% 4.30% 11.29% $ 46.00 10 $ 39.78 $ - -90.00% $ - 1.50 11.90% 4.30% 15.70% $ - 11 $ 29.75 $ 2.00 2.25% $ 2.05 0.85 11.90% 4.30% 10.76% $ 24.03 12 $ 73.09 $ - -1.00% $ - 0.38 11.90% 4.30% 7.19% $ - 13 $ 20.39 $ 6.00 5.25% $ 6.32 0.71 11.90% 4.30% 9.70% $ 142.04 14 $ 18.25 $ 1.00 8.00% $ 1.08 1.00 11.90% 4.30% 11.90% $ 27.69 15 $ 7.00 $ 1.35 8.85% $ 1.47 0.73 11.90% 4.30% 9.85% $ 147.24
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