Sheet1

Implied Risk Premium Calculator

Enter level of the index =
1298
Enter current dividend yield =
4.02%
Enter expected growth rate in earnings for next 5 years
5.50%
for market =
Enter current long term bond rate =
3.95%
Enter risk premium =
4.00%
Enter expected growth rate in the long term =
3.95%

Intrinsic Value Estimate

1
55.05 $

Expected Dividends = $
Expected Terminal Value =
Present Value =
$
51.00
Intrinsic Value of Index $=
1,452.63

2
58.08 $

3
61.27 $

49.84

48.71

4
64.64 $
$
47.60 $

5
68.20
1,772.26
1,255.49

52.1796

Implied Risk Premium

Implied Risk Premium in current level of Index
4.37%
=
(Go under Tools and choose Solver: See below)
1
Expected Dividends =
$55.05
Expected Terminal Value =
Present Value =
$
50.82 $
Intrinsic Value of Index $=
1,330.07

2
$58.08
49.50

3
$61.27
$

48.21

4
$64.64
$

46.96

$
$

5
$68.20
1,623.45
1,134.58

$72.63

This is a picture of the solver option, with the inputs that I used (Do not try to enter numbers in it).
Enter current level of index where you see 759.64.

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Sheet1

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Buyback computation

Year

Dividend Yield
Buybacks/Index
2001
1.37%
1.25%
2002
1.81%
1.58%
2003
1.61%
1.23%
2004
1.57%
1.78%
2005
1.79%
3.11%
2006
1.77%
3.38%
2007
1.89%
4.00%
Average yield between 2001-2007 =

Yield
2.62%
3.39%
2.84%
3.35%
4.90%
5.15%
5.89%
4.02%

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