Use Model 3.34 on the Dividend Discount Model tab of the chapter spreadsheet.) a.) Describe the pattern
Question:
a.) Describe the pattern of PEP's dividend growth rates over the past 5 years.
b.) Do you think the forecasted dividend growth (5%, 4%, 3%, 2% and 2%) fits well with the historical dividend growth pattern?
c.) Why is PEP's required return so low (4.833%)?
d.) Does PEP's dividend yield represent a substantial portion of its expected return?
e.) Describe PEP's overall valuation based on the dividend discount model shown in the example.
f.) Does your answer to e.) change if you stress PEP in the model and raise its beta to 0.55?
g.) Next, reset PEP's beta to its historical average by removing the alternative beta (cell D92) and reducing the long-term perpetual growth rate from 2% to 1% (cell L80). Describe PEP's valuation after reducing the expected dividend growth rates.
h.) Write a brief overview of PEP's valuation based on a dividend discount model.
Dividend yield refers to a stock's annual dividend payments to shareholders, expressed as a percentage of the stock's current price. The dividend per share that a company pays divided by the share price. This is reported on the financial statements...
Step by Step Answer:
Applied Equity Analysis and Portfolio Management Tools to Analyze and Manage Your Stock Portfolio
ISBN: 978-1118630914
1st edition
Authors: Robert A.Weigand