Source: Standard & Poor’s Compustat Database. Prices are August 1996 prices. Quarterly dividend is the current annual dividend rate as reported by Compustat, divided by 4. I/B/E/S g is the most recent mean estimate of the long-term growth rate as reported by Compustat.
1In efficient markets, the current interest rate is also the best estimate of future interest rates.
2See, for example, Copeland/Weston, Chapter 13, Financial Theory and Corporate Policy, Third Edition, 1988, Addison-Wesley, Reading, MA.; Brealey/Myeres, Chapter 9, page 190, Principles of Corporate Finance, Fourth Edition, 1991, McGraw-Hill; Robert C. Higgins, Chapter 8, Analysis for Financial Management, Fourth Edition,1995, Fourth Edition, Irwin.
3Robert E. Allen, "The 1996 Telecommunications Bill," remarks delivered at a news conference, Washington, D.C., February 8, 1996; and "AT&T: Creating New Value in a 'Fast-Forward' Industry," remarks delivered to the Sanford Bernstein Strategic Decisions Conference, New York, NY, June 11, 1996.
5Jerry Taylor, speech before the National Association of Regulatory Commissioners, Los Angeles, CA, July 23, 1996.
6In applying the DCF Model to the S&P Industrials, we included in the DCF analysis only those companies which have a reported stock price, pay a dividend, have a positive growth rate, have at least 3 analysts' growth estimates, and have at least one common share outstanding.