Compare your results in part with the current share price

Reference no: EM133557881

Valuation Using the Discounted Dividend Model

The dividend discount model is a well-known model for pricing shares based on the present value of future expected dividends. We will use the two-stage variable growth model introduced in Week 5 to estimate the share prices of MQG using real data drawn from the financial database: DatAnalysis Premium.

1. Obtain the last ten years (2014 to 2023) of dividend payment history for MQG. For simplicity, each year's dividends are equal to the sum of the interim and final dividends. Determine the dollar dividends received by shareholders for each of the past ten years.

2. Based on the information obtained in part (a) and your own economic analysis, forecast the next 5 year's expected dividend payments and the annual constant growth rate of dividends in the second stage starting in year 6. Must elaborate on the reasons for your forecasts.

3. Look up the beta of the company from the "Key Data" section under the company's name in DatAnalysis. Google the current 10-year Australian government bond yield, which will be used as the risk-free rate. Then calculate the required rate of return (discount rate) of equity capital based on the Capital Asset Pricing Model (CAPM). ?

4. Calculate the share price for the company based on the "two-stage" variable growth model. Need to list the formula for your calculation.

5. Compare your results in part (d) with the current share price of MQG at $175.17 per share (accessed on 09/08/2023). Comment on the difference. Are you ready to trade the stocks based on your own analysis? Please elaborate.

Reference no: EM133557881

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