Dividend Valuation Model

P₀= D₁ / r - g

Where D1 is the annual dividend expected to be paid next year, r is the required rate of return for the stock, and g is the annual growth rate of future dividends.

Choose a stock from the US that has paid a steady stream of dividends. Estimate the stock price using the dividend valuation model explained above. Make sure you use a reasonable required rate of return r (10-25%) that is greater than the dividend growth rate g.

Compare the estimated price with the current market price and comment on whether the current price is over-valued, fairly-valued, or under-valued. Provide some possible explanations as to why your estimated price is different from the current market price.