FINC 430 Week 2/3 Discussions and Projects

Quiz-Essay Analysis Paper 2 – Dividend Discount Model

INTRODUCTION: Use the Dividend Discount Model for this paper. This method is important because

DDM is a traditional income method of valuation for financial institutions. DDM relies on actual or

imputed dividend payout to derive an absolute measure of value. DDM is a complement to a market

method of valuation using comparable companies.

For example, other income methods include discounted cash flow and other market methods include

direct comparison and normalizing of financial ratios.

If you discover issues with your selected company’s financial statements, please let me know. Additional

information on writing the QEP is posted in our course, under the Content-Student Resources-

Assignments-Checklists – be sure to take advantage of this, as it will prove quite helpful for this and

following papers. Finally, although we don’t grade your writing process directly– plan to start on time

with preliminary research, draft, revision(s), and finalize steps.

Contact EWC (Resources Menu-EWC) to make sure your paper is written in a manner that is in scope

and carries the most impact. Let me know if you feel like you might be getting stuck or need clarification

on developing analytic perceptions or have scope questions.

SPECIFICS OF THE ASSIGNMENT. In this assignment, you will write a 1-2 page narrative analysis of your selected company’s dividend discount valuation. Base your analysis on descriptive statistical analysis of 3-5 years of historical data. No year over year, point to point recitations please. Calculate and use descriptive statistics (e.g., mean, median, standard deviation, geometric mean, rolling average, min, max, etc.) see example Excel worksheet or other sources. Use descriptive statistics in your narrative analysis for best grade (e.g., discuss mean relative to median, standard deviation, reversion to the mean, scenarios, rolling average trend, etc.). For DDM: What is the best dividend metric to use? Mean, median, most recent? What is the standard deviation? What might be a reasonable HighLowMostLikely distribution of dividend, growth rate, discount rate and valuation? Be aware that most present value equations do not produce accurate results if you attempt to use a growth rate higher than the discount rate. Ask me if you have questions or are unsure what your steps should be. Your paper must include thesis-evidence-discussion-conclusion. TECHNICAL: Start your assignment on time: Monday, August 31, 2015 Due date: September 13, 2015 Draft by: Friday, September, 5, 2015 final -- September 13, 2015; 12-point Times New Roman font … must include an APA-formatted Title Page; double-spaced; Place Tables and charts in Appendix. Use Company 10k and UMUC Library Mergent Online only for financial

statement information. Show all work-calculations; Cite all sources including page numbers where appropriate. NOTE: This 1-2 page paper can be done in a short timeframe if the work starts on time and is completed in well-organized segments-drafts. If work for this assignment starts on the due date, expect a stressful experience.