Dividend Discount Model According to the 2005 Value Line Investment Survey, the dividend growth for ConocoPhillips (COP) is 5 percent. Find the current price quote and dividend information at finance.yahoo.com. If the growth rate given in the Value Line Investment Survey is correct, what is the required return for ConocoPhillips? Does this number make sense to you?
Dividend Discount Model Go to www.dividenddiscountmodel.com and enter JNJ (for Johnson & Johnson) as the ticker symbol. You can enter a required return in the Discount Rate box and the site will calculate the stock price using the dividend discount model. If you want a return 5 percent greater than the projected growth rate, what price should you be willing to pay for the stock? At what required return does the current stock price make sense? You will need to enter different required returns until you arrive at the current stock price. Does this required return make sense? Using this market required return for Johnson & Johnson, how does the price change if the required return increases by 1 percent? What does this tell you about the sensitivity of the dividend discount model to the inputs of the equation?
Market Operations How does a stock trade take place? Go to www.nyse.com and click on "The Trading Floor" and find the discussion of how trades take place. Summarize the trading process.
