Go to google finance: https://www.google.com/finance and type in a publicly traded company that you are
familiar with. For example, Microsoft:
A. Choose a stock that interests you. Utilizing Bloomberg, Yahoo Finance, or Google Finance, etc. as a source of data, collect the following information: a. The stock’s Beta b. Use the I yr market risk premium from Kenneth French’s website c. The risk-free rate (rRF) d. The last dividend paid (Do) e. The annual expected growth rate of dividends (g)
B. Use the Discounted Dividend Model for Constant Growth Stocks and solve for the intrinsic stock price (P)
Based on your above calculations, compare the calculated price with the current market price and indicate whether the stock price is overvalued, undervalued, or at equilibrium? Explain.
C. Now, assume that your company has just released a new product and will be experiencing supernormal growth of 25% for the next three years. In Excel, use the information in “A” and the Discounted Dividend Model for Nonconstant Growth Stocks and solve for the intrinsic stock price 0-50).