- Watch the video, .
- Select a publicly traded company that pays dividends. You may select any publicly traded company that pays dividends, or choose one of the companies discussed in .
- Determine the most recent stock price and the total dividends paid over the past year.
- Calculate the current dividend yield on the stock.
- Calculate the required rate of return (Ke) for an investment in the common stock. You should use formula 10-9 in the textbook to do this calculation and use an assumed growth rate of 5%.
- Identify the current P/E ratio for the company from a source such as Yahoo! Finance or Barrons.
In your post,
- Show your calculations of the dividend yield and required rate of return (Ke), and present the P/E ratio.
- Explain the relationship between your chosen companys Ke and P/E ratio and what that relationship indicates about the risk of the companys future cash flows.
- Explain whether the general relationship between a high Ke and a low P/E ratio (or low Ke and high P/E ratio) is supported by the data for your chosen publicly traded company.
- Predict the impact on the companys stock price based on your forecast that the company will grow its dividends by a rate higher than 5%.
- Compare your companys P/E ratio with the P/E ratios of two other companies in its industry.
- Hypothesize which company in this industry should have the lowest Ke based on the P/E comparisons.
- Summarize the connection between a companys growth rate, its required rate of return, and its value (stock price).
Be sure to think strategically and apply the concepts from the course textbook.
Your initial response should be a minimum of 200 words. Graduate school students need to learn how to assess the perspectives of several scholars. Support your response with at least one scholarly and/or credible resource in addition to the text.
