Using the Yahoo! Finance website (finance.yahoo.com) get the current price and five-year dividend history for Intel Corporation (INTC). To gather this data, enter the ticker symbol (INTC) in the search box at the top of the page, and select Intel Corporation from the list. Record the current price from this page. Now click on the Historical Data link. To get a table of previous dividends, select Dividends Only in the show list, set the Time Period to five years prior to today`s date, and click the Apply button. Click the Download Data link to download a file with this data. You may have the choice of either saving the file or opening it directly in Excel. It is easier to let it open in Excel. Otherwise, save the .csv (comma separated variables) file and then open it with Excel. It shouldn’t need any further processing. You now have the dividends in a worksheet.
a. Because INTC pay dividends quarterly, for each quarter calculate percentage change in the dividends. Calculate the annual growth rate of the dividend.
b. Calculate the intrinsic value of the stock using an 8% required rate of return and the calculated annual growth rate. Use the sum of the most recent four quarterly dividends as ??0.
c. Now assume that INTC`s dividend growth rate will remain the same for the next five years, then fall to 75% of its current rate. What is the value of the stock using the two- stage dividend discount model (non-constant dividend discount model)?
d. How does the calculated intrinsic value compare to the actual market price of the stock (i.e. whether the stock is undervalued, overvalued, or fairly valued)? Would you buy the stock at its current price?