Calculate theoretical stock price for disney

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Reference no: EM131989669

The dividend payout by a company can tell you a lot about what the management thinks of the current situation and what it sees upcoming in the future. Studying the dividend status is one of the basic methods of valuing stocks: Dividend Discount Model. The idea is that the stock is worth all of the future cash flows (i.e., dividends) discounted by the appropriate rate.

In this part of the project, assume the following metrics for Disney:

Discount rate: 14.885%

The dividends are expected to grow 13%, 13%, 14%, 25%, 14.7% for the next five years with the constant growth rate of 12.9%.

The current dividend is $1.42.

Calculate the theoretical stock price for Disney. Compare your answer to today’s stock price. What do you see? Would you recommend potential investors to purchase Disney’s stock? Why or why not?

Reference no: EM131989669

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