Dividend Discount Model / Stock Valuation
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Can you try this for number 2 it is what the prof sent:
The URL for .1 is still current however the 2 URL dividenddiscountmodel.com is inactive and the NYSE web site for 3 has been updated and no longer has the easy links to the "trading floor" and the "anatomy of a trade." I did however find a pdf in the educational section that has some explanation of a trade. The link is as follows: http://www.nyse.com/pdfs/TG_Mech.pdf
1. Dividend Discount Model: According to the 2006 Value Line Investment, the dividend growth for ConocoPhillips (COP) is 9.5%. Find the current price quote and dividend information at finance.yahoo.com. If the growth rate given in the Value Line Investment Survey is correct, what is the required return for ConocoPhillips? Does this number make sense to you?
2. Dividend Discount Model: Go to www.dividenddiscountmodel.com and enter BA (for Boeing) as the ticker symbol. You can enter a required return in the Discount rate Box and the site will calculate the stock price using the dividend discount model. If you want an 11 percent return, what price should you be willing to pay for the stock? At what required return does the current stock price make sense? You will need to enter different required returns until you arrive at the current stock price. Does this required return make sense? Using this market required return for Boeing, how does the price change if the required return increases by 1 percent? What does this tell you about the sensitivity of the dividend discount model to the inputs of the equation?
3. Market Operations: How does a stock trade take place? Go to www.nyse.com, and click on "The Trading Floor" and "Anatomy of a Trade." Describe the process of a trade on the NYSE.
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Solution Summary
This solution contains step-by-step calculation and justification to determine the required rate of return for ConocoPhillipids, the sensitivity of the discount dividend model and the steps in buying and selling shares at the stock exchange.
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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