One of the ways to value the share price of a stock is using the dividend valuation model. It consists of calculating the present value of all future dividends from the stock. Assuming a constant growth in future dividends, the formula for a stock price today is: P0= D1 / rg.

Where D1 is the annual dividend expected to be paid next year, r is the required rate of return for the stock, and g is the annual growth rate of future dividends.

For example, from the following site and using the historical dividend amount,

finance yahoo International Business Machines Corporation (IBM) (copy and paste this into a search and it is the first article)

One can estimate the annual dividend growth rate to be about 5%. Assuming the required rate of return 15%, and next year's dividend of $6.52 ( = 1.63 x 4), one can estimate the stock price to be: P0 = D1/ rg = (1.63 4) 0.15 0.05 = $65.20

This estimated price is significantly lower than the current market price of about $124 (as of March 8, 2021). In other words, the current market price is significantly over-priced.

For your initial discussion post, choose a stock that has paid a steady stream of dividends. Estimate the stock price using the dividend valuation model explained above. Ensure you use a reasonable required rate of return r (10-25%) that is greater than the dividend growth rate g.

Compare the estimated price with the current market price and comment on whether the current price is over-valued, fairly-valued, or under-valued. Provide some possible explanations as to why your estimated price is different from the current market price.

word count 250 - 300 please and thank you