Using the constant-growth method for our Dividend Discount Model (DDM), find the intrinsic value of a share of Walt Disney Company stock. To do so, enter DIS in the Quote box of the CNBC site. You will need to find the most recent annual dividend and beta (use 5-year beta). You may assume that Disneys growth rate in dividends and earnings is 9%.

For the appropriate discount rate (k), you will need to compute the required rate of return on Disney using the Security Market Line (SML) of the CAPM. So, you need to find the risk-free rate of return (use the Yield to Maturity of the 30-year T-Bond) and you may assume that the expected return on the market for the next period is 8.5%.

What is Disneys required rate of return according to the SML of the CAPM? What is the intrinsic value of a share of Disney stock according to the DDM? Currently, is Disneys stock price overvalued or undervalued? Suppose that the expected return on the market portfolio is 9.5% (rather than 8.5%). What is our new valuation? According to the value calculated in above, is the stock price in the market currently overvalued or undervalued? Suppose that Disneys growth rate in dividends turns out to be a constant 8% (rather than 9%). Using the original 8.5% expected return on the market, what is the new valuation? According to the value calculated in the question above, is the stock price currently overvalued or undervalued? According to the calculated values above, what can we conclude will happen to our valuation following an increase in the expected return on the market?(value increase, decrease, or not impacted?) According to the calculated values above, what can we conclude will happen to the intrinsic value following a decrease in the expected growth rate in dividends?(value increase, decrease, or not impacted?) Based upon the valuations above, what might we be able to conclude about the validity of the Dividend Discount Model (DDM)? (Select one: The DDM is highly reliable in a variety of scenarios, the DDM is best applied to those stocks with zero growth in dividends, or in some cases, the DDM valuation is highly sensitive to small variations in variables.