Solution-Dividend discount model, Sofia Garcia is a

Dividend discount model

Assignment Help Finance Basics

Reference no: EM133073268

Dividend Discount Model:

Sofia Garcia is a buy-side analyst for a large pension fund. She frequently uses dividend discount models such as the Gordon growth model for the consumer noncyclical stocks that she covers. The current dividend for Procter & Gamble Co. (NYSE: PG) is $1.46 and the dividend 8 years ago was $0.585. The current stock price is $80.

What is Procter & Gamble's historical annual dividend growth rate?
Garcia believes that the future annual dividend growth rate will be exactly half of the historical rate. Using the Gordon growth model, what is her expected rate of return on Procter & Gamble's stock?
Garcia actually does not agree with the answer from part B above. Based on a market analysis of Procter & Gamble's competitors, she believes that the stock's required rate of return actually is 7.53%. If Garcia continues to assume that the future dividend growth rate will be exactly half of the historical rate, what is her estimate of the fair value of the stock using the Gordon growth model?

Reference no: EM133073268

Questions Cloud

How much is the interest revenue : First annual lease payment is payable immediately on the contract date on January 1, Year 1. How much is the interest revenue for Year 1

What is the probability of default : What is the distance to default of this firm in KMV model? What is the probability of default?

What is the expected loss of default in 1 year for the bank : Suppose Bank Z lends 1 million to X and 5 million to Y. The probability of default in the first year for X is 0.2 and for Y is 0.3. The probability of joint def

What amount should be reported in its income statement : The enacted tax rate for 2020 is 28%. What amount should be reported in its 2020 income statement as the current portion of its provision for income taxes

Dividend discount model : Sofia Garcia is a buy-side analyst for a large pension fund. She frequently uses dividend discount models such as the Gordon growth model for the consumer noncy

How much is the total tax expense for the current year : The entity reported a deferred tax asset is zero and the deferred tax liability at P90,000. How much is the total tax expense for the current year

Valuation by multiples and comparables : You are trying to evaluate the fair value of Alaska Airlines' stock. To do so, you have identified 5 comparable publicly traded firms and you obtained the curre

Project proposal for networking course project : Prepare project proposal for Networking Course Project - A brief description of the modules in your project E.g. Administrator Module, User Module, etc

How is the cash conversion cycle calculated : How is the cash conversion cycle calculated? If Myer's cash conversion cycle went from 20 days in 2015 to negative (-) 4 days in 2016 what does this indicate ab

User Account

All Pages

Dividend discount model

Reference no: EM133073268

Reference no: EM133073268

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT