Using the Yahoo! Finance Web site (https://finance.yahoo.com) get the current price and five-year dividend history for 3M Company. To gather this data, enter the ticker symbol (MMM) in the search box at the top of the page, and select 3m Company from the list. Record the current price from this page. Now, click on the Historical Data link. To get a table of previous dividends select Dividends Only in the Show list, set the Time Period to five years prior to today’s date, and click the Apply button. Click the Download Data link to download a file with this data. You may have the choice of either saving the file or opening it directly in Excel. It is easier to let it open in Excel. Otherwise, save the .csv (comma separated variables) file, and then open it with Excel. It shouldn’t need any further processing. You now have the dividends in a worksheet.

a. Because MMM pays dividends quarterly, for each quarter calculate the percentage change in the dividends. Now, calculate the compound quarterly growth rate of the dividends using the Geomean function.

b. Now, annualize the quarterly dividend growth rate.

c. Calculate the intrinsic value of the stock using a 12% required rate of return and the calculated annual growth rate. Use the sum of the most recent four dividends as D₀.

d. Now assume that MMM’s dividend growth rate will remain the same for the next five years, and then fall to 75% of its current rate. What is the value of the stock using the two-stage dividend discount model?

e. If the dividend growth rate begins declining immediately from the current level to its long-term rate over 20 years (15-year transition plus the initial 5 years), what is the value of the stock according to the H-Model? What is the value using the three-stage model? Use the same assumptions as in part d.

f. How does the calculated intrinsic value compare to the actual market price of the stock for each of the models used? Use an If statement to display whether the stock is undervalued, overvalued, or fairly valued. Would you buy the stock at its current price?