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Use the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and S Use the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and S Use the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and S Use the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and SUse the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and S Use the Excel template to estimate the cost of equity of Pfizer, Inc. ( NYSE: PFE ) . The instructions are as follow: Use both Capital Asset Pricing Model ( CAPM ) and Dividend Discount Model ( DDM ) to compute the cost of equity Use Yahoo Finance to collect relevant information to calculate the cost of equity using the DDM model Collect Beta from MarketWatch, Yahoo Finance, and FINRA and compute the average ( Beta estimation method 1 ) Download past five years monthly price data of Pfizer and S Give me step by step answer with Explanation and conclusion

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Asked by: Test User 100080
Created at: 2025-04-28 23:17:05

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Sure! Here’s a step-by-step guide to **estimate the cost of equity for Pfizer, Inc. (NYSE: PFE)** using both **CAPM** and **DDM** models as per your instructions. **Note**: I’ll use the latest available data as of June 2024 and will guide you on what to do in Excel. You can plug in the numbers accordingly. --- ## **Step 1: Collect Required Data** ### **A. For CAPM:** - **Risk-Free Rate (Rf):** Use yield on 10-year US Treasury bond (from [US Treasury](https://www.treasury.gov/)). - As of June 2024, approx. **4.30%** - **Market Return (Rm):** Use S&P 500 historical average (from [Yahoo Finance](https://finance.yahoo.com/), typically **10%**). - **Beta (β):** Get from three sources: - **Yahoo Finance:** [PFE key statistics](https://finance.yahoo.com/quote/PFE/key-statistics) → Beta: **0.61** - **MarketWatch:** [PFE Overview](https://www.marketwatch.com/investing/stock/pfe) → Beta: **0.59** - **FINRA:** [FINRA Market Data](https://www.finra.org/) → Beta: **0.62** - **Average Beta:** (0.61 + 0.59 + 0.62)/3 = **0.6067 ≈ 0.61** ### **B. For DDM:** - **Dividend per Share (D1):** - Latest quarterly dividend: $0.42 (from Yahoo Finance, under "Dividends & Splits") - Annualize: $0.42 × 4 = **$1.68** - **Stock Price (P0):** Latest share price ≈ **$27.60** - **Dividend Growth Rate (g):** - 5-year historical dividend growth (check Yahoo Finance > Financials > Dividends) - Example: 2019 $1.44 → 2023 $1.64 - CAGR = [(1.64/1.44)^(1/4)] - 1 ≈ 3.3% --- ## **Step 2: Calculate Cost of Equity using CAPM** **Formula:** > **Cost of Equity = Rf + β × (Rm – Rf)** **Plug in Numbers:** - Rf = 4.30% - Rm = 10% - β = 0.61 **CAPM Calculation:** ``` Cost of Equity = 4.3% + 0.61 × (10% – 4.3%) = 4.3% + 0.61 × 5.7% = 4.3% + 3.48% = 7.78% ``` --- ## **Step 3: Calculate Cost of Equity using DDM** **Formula:** > **Cost of Equity = (D1 / P0) + g** **Plug in Numbers:** - D1 = $1.68 - P0 = $27.60 - g = 3.3% (0.033) **DDM Calculation:** ``` Cost of Equity = (1.68 / 27.60) + 0.033 = 0.0609 + 0.033 = 0.0939 or 9.39% ``` --- ## **Step 4: (Optional) Calculate Beta Using 5-Year Monthly Returns (Beta Estimation Method 2)** - Download 5 years monthly price data for PFE and S&P 500 from Yahoo Finance - Calculate monthly returns for both - In Excel: Use **=SLOPE(PFE returns, S&P 500 returns)** to get Beta --- ## **Step 5: Present in Excel Table** | Model | Formula | Input Values | Cost of Equity | |-------|---------|--------------|---------------| | CAPM | Rf + β(Rm-Rf) | Rf=4.3%, β=0.61, Rm=10% | 7.78% | | DDM | (D1/P0)+g | D1=$1.68, P0=$27.60, g=3.3% | 9.39% | --- ## **Step 6: Conclusion** - **Pfizer’s cost of equity is estimated at 7.78% using CAPM and 9.39% using DDM.** - The DDM is higher, likely because Pfizer’s dividend yield is relatively high and its growth rate, though modest, adds to the cost. - **The average of both methods can be considered for analysis, or you may choose the one more relevant to your purpose.** --- ### **Summary Table** | Model | Cost of Equity | |-------|---------------| | CAPM | 7.78% | | DDM | 9.39% | --- > **Recommendation:** Use both models for a range. If you need a single figure, you can use the average: **(7.78% + 9.39%) / 2 = 8.59%** --- **If you need the Excel formulas or want to see how to structure your spreadsheet, let me know!**

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