In: Finance
Assume the following information about a company:
Past dividends
2015 $1.32 Required return = 11%
2016 $1.44
2017 $1.54
2018 $1.66
2019 $1.76
Use the appropriate dividend model to place a value on this stock for 2020.
How do I set this up in excel?
Year | Past Dividends | |
2,015 | 1.32 | |
2,016 | 1.44 | |
2,017 | 1.54 | |
2,018 | 1.66 | |
2,019 | 1.76 | |
Calculate compounded annual growth rate of dividend from 2015 to 2019 | ||
Growth rate of dividend | 7.46% | (1.76/1.32)^(1/4) |
Equity Valuation for 2020 as per dividend discount model | ||
Value of Equity | 53.38 | 1.76*1.0746)/(.11-.0746) |
Dividend at year 0 *(1+growth rate of dividend)/(Cost of equity - growth rate of dividend) |
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