QuawannaProby_Unit6Project

QuawannaProby_Unit6Project - halfway down the left hand...

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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
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Unformatted text preview: halfway down the left hand side of the page. Dow Chemical Co. (DOW) Beta = 0.8 Assuming that: Rf = 4% Rm = 12% In 2001 Dow Chemical paid a dividend of $1.29 per share, and in 2007 they paid $1.63 per share, while the forecast for 2008 is 1.68 but since there is still some time left in 2008, we cannot base our calculations on the forecasted figures. Solution Using CAPM: R f = 4% R m = 12% Beta = 0.8 Since: ( ) E f m f R R R R β = +-Where RE is the Rate of Return on Stock 4 0.8(12 4) E R = +-= 10.4% Growth rate (g) = 3.98% (Please see the attached excel sheet for the calculations) 1 D P r g =-= $1.68 0.104 0.0398-= $26.17...
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QuawannaProby_Unit6Project - halfway down the left hand...

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