Please help! (3) Pick any retail stock that offers a dividend and has existed fo
ID: 1181744 • Letter: P
Question
Please help!
(3) Pick any retail stock that offers a dividend and has existed for at least 5 years.
a) What is the Beta of the stock?
b) What is the YTD stock market return?
c) What is the capitalization, k, of teh stock?
d) Compute the growth rate of the dividend, g. (You can either compute the ROE*plowback ratio or compute the annual growth rate of dividends)
e) Based on this information, what should the price of the stock be today using the constant-growth dividend discount model?
f) What is the actual price of the stock on the market?
g) Do you think the constant dividend discount model is a good model to use for this stock? Why or why not?
h) What is the P/E ratio? How does it compare to g?
Explanation / Answer
for best buy
from december 2 2003 to december2 2013
annual growth rate of dividends=1.096439
beta = 1.32095
Required rate of return k= 12.25%
Net present value = 6180.208 millions
excel file
https://drive.google.com/file/d/0B9vqLyrtN8TfYXRxeGtWUXVvVjA/edit?usp=sharing