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Estimate the stock price, Using the Discount Dividend Model (DDM) estimate the intrinsic value of the firm’s stock using the following steps:

Category: Accounting & Finance Paper Type: Online Exam | Quiz | Test Reference: N/A Words: 490

·         Estimate the dividend growth rate using the actual growth rate for the last 5 years

Dividend Growth Rate = D1/D0-1

D1=D0 (1+g)

D1/D0= (1+g)

D1/D0-1= g (Dividend growth rate)

For Baxter international:

 

Year

Dividend

Dividend Growth

2013

1.92

-

2014

2.05

6.7%

2015

1.27

-38%

2016

0.51

-59%

2017

0.61

19%

 

For Abbott laboratories:

Year

Dividend

Dividend Growth

2013

0.64

-

2014

0.90

40%

2015

0.98

8.8%

2016

1.045

6.63%

2017

1.075

2.87%

 


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