Gordon Growth Model: Verification and Analysis of Three Stocks - Prof. Nikunj Kapadia, Assignments of Finance

Download Gordon Growth Model: Verification and Analysis of Three Stocks - Prof. Nikunj Kapadia and more Assignments Finance in PDF only on Docsity! Homework 0 1. Recall that the Gordon Growth Model provides the value of a stock with a constant dividend growth rate. Defining the following symbols: g = dividend growth rate k = cost of equity D = current dividend (annual). P = price of the stock Then, the Gordon Growth formula states that: P = D(1+g)/(k-g). The Gordon Growth formula is derived by summing up the present values of the future dividends. Verify, using Excel, that it is indeed true. 2. Pick any 3 of your favorite stocks. For these three stocks and the S&P 500 stock index, download price and dividend data on these three stocks from Yahoo Finance. a. How does the return on these stocks compare with the S&P 500? Did they outperform the S&P 500? b. Do these firms pay dividends? If so, what was the dividend amount in the last financial year? c. Do these firms have debt? If so, how much debt do they have? d. Do these firms have options traded on their stock?