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    Mike19881's Avatar
    Mike19881 Posts: 2, Reputation: 1
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    #1

    Nov 21, 2012, 11:51 AM
    Business Finance assignment
    select two competing publicly listed companies I choose the Google and Yahoo

    B. Estimate intrinsic value of a stock using Dividend Discount Model (DDM):

    Now determine the estimated dividends of the firm next year and the growth rate. Refer to the company’s financial statements. For dividends, check how much dividend the firm paid in the last year (Do), then estimate the growth rate (g) of dividend and/or free cash flow. Also estimate the growth rate by using the formula g=ROE(1-payout ratio)compare the growth rates and determine which growth rate is reasonable. If the growth rate is super normal/high, then make assumption how long this super normal growth will last before returning to normal/stable growth. Use constant or non-constant growth Dividend Discount Model (DDM) to calculate the intrinsic value of a share of stock.Financial statements are available at finance.yahoo.com website.
    Curlyben's Avatar
    Curlyben Posts: 18,514, Reputation: 1860
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    #2

    Nov 21, 2012, 01:07 PM
    What do YOU think ?
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    Mike19881's Avatar
    Mike19881 Posts: 2, Reputation: 1
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    #3

    Nov 21, 2012, 05:03 PM
    I just don't know how to start, I already pick my company which is Google and Yahoo but I don't know how to determine the dividends of the firm next year and the growth rate

    select two competing publicly listed companies I choose the Google and Yahoo

    B. Estimate intrinsic value of a stock using Dividend Discount Model (DDM):

    Now determine the estimated dividends of the firm next year and the growth rate. Refer to the company’s financial statements. For dividends, check how much dividend the firm paid in the last year (Do), then estimate the growth rate (g) of dividend and/or free cash flow. Also estimate the growth rate by using the formula g=ROE(1-payout ratio)compare the growth rates and determine which growth rate is reasonable. If the growth rate is super normal/high, then make assumption how long this super normal growth will last before returning to normal/stable growth. Use constant or non-constant growth Dividend Discount Model (DDM) to calculate the intrinsic value of a share of stock.Financial statements are available at finance.yahoo.com website.
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