FINA 301: SHERWIN-WILLIAMS EXAMPLE
Supporting Information for Financial Analysis Exercise III
Part A: This first part of the exercise asks you to select one of four company stocks and apply the constant- growth model in an attempt to value a share of that stock. Here is the equation for the model, Equation 8-6 in the second edition of the textbook:
P0 = = , where P0 = current price of the stock D0 = dividend per share at the end of the last period D1 = dividend per share at the end of period 1 i = discount rate g = constant growth rate
We need to find values for the variables in this equation in order to solve for P0. The discount rate is given to us at 12.5%. So we need to find values for D0, g, and D1. The last variable equals [D0,∙ (1 + g)], so we are left to find only D0 and g.
D0 is a historical number. We will look for this number for Sherwin Williams at Yahoo! Finance using data accessed in 2009 for this example:
a. At http://finance.yahoo.com/ enter SHW in the input field next to Get Quotes at the top of the page and click Get Quotes to open the stock’s overview/main page.
b. Click on Historical Prices under the heading “Quotes” on the left hand-side of the main/overview page.
d. In the section “Set Date Range” click in the circle for “Dividends Only” and then click “Get Prices” to get a history of quarterly dividends that the company has paid. e. Accessing this page for Sherwin-Williams in May 2009 we find the following:
Date
13-May-09 $ 0.355 Dividend
25-Feb-09 $ 0.355 Dividend
12-Nov-08 $ 0.35 Dividend
20-Aug-08 $ 0.35 Dividend