Share
Explore BrainMass

Gorden growth model & CAPM (Intel corp)

Pick a company that pays dividends, then calculate the expected growth rate of your company using the CAPM.

Once this task is complete, calculate the expected growth rate using the Constant Growth (or Gordon Growth) Model.

You may need additional information to complete this exercise. You can find a stock's beta and growth rate at http://quote.yahoo.com/. Once there, enter the ticker for the company in question. Then, click on "Key Statistics" about halfway down the left hand side of the page. You can find the beta here.

Alternatively, you can go to http://www.reuters.com/. Click on "Stocks" at the top left of the page. Enter the ticker symbol for the company in question. Click on "Ratios" about halfway down the left hand side of the page.

Solution Preview

Gorden Growth model:

P=D/(K-g)
D= expected dividend per share one year from now.
K=cost of capital .i.e, required rate of return of the equity investor
Required rate of return means the rate of return needed to induce investors or companies to invest in something.
G=growth rate in dividends in perpetuity.

Dividend 5 year growth ...

Solution Summary

The answer contains the computation of expected growth rate of Intel corp under Gorden growth model and CAPM.

$2.19