Watch the video, Dividend Discount Model (DDM)Links to an external site.. Select a publicly traded company that pays dividends. You may select any publicly traded company that

 

  • Watch the video, .
  • Select a publicly traded company that pays dividends. You may select any publicly traded company that pays dividends, or choose one of the companies discussed in .
  • Determine the most recent stock price and the total dividends paid over the past year.
  • Calculate the current dividend yield on the stock.
  • Calculate the required rate of return (Ke) for an investment in the common stock. You should use formula 10-9 in the textbook to do this calculation and use an assumed growth rate of 5%.
  • Identify the current P/E ratio for the company from a source such as Yahoo! Finance or Barron’s.

In your post,  

  • Show your calculations of the dividend yield and required rate of return (Ke), and present the P/E ratio.
  • Explain the relationship between your chosen company’s Ke and P/E ratio and what that relationship indicates about the risk of the company’s future cash flows.
  • Explain whether the general relationship between a high Ke and a low P/E ratio (or low Ke and high P/E ratio) is supported by the data for your chosen publicly traded company.
  • Predict the impact on the company’s stock price based on your forecast that the company will grow its dividends by a rate higher than 5%.
  • Compare your company’s P/E ratio with the P/E ratios of two other companies in its industry.
  • Hypothesize which company in this industry should have the lowest Ke based on the P/E comparisons.
  • Summarize the connection between a company’s growth rate, its required rate of return, and its value (stock price).

Be sure to think strategically and apply the concepts from the course textbook.

Your initial response should be a minimum of 200 words. Graduate school students need to learn how to assess the perspectives of several scholars. Support your response with at least one scholarly and/or credible resource in addition to the text.

    Watch the video, Dividend Discount Model (DDM)Links to an external site.. Select a publicly traded company that pays dividends. You may select any publicly traded company that

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