Use the dividend discount model to determine a fundamental value for Sky TV’s stock price. Given that the current price of Sky TV is $6.52, what is your recommendation?  

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The dividend discount model (DDM) is a method of valuing stocks based on the present value of future dividends. The DDM assumes that an investor’s valuation of a company is equal to the sum of all its expected future dividend payments, discounted back to their present values.

In order to calculate Sky TV’s fundamental value using the DDM, we need to know three factors:
1) the current stock price
2) expected future dividends
3) required rate of return.
If these values are not available, then it is impossible to determine Sky TV’s fundamental value via the DDM.
Given that the current price of Sky TV is $6.52 and you have access to these variables, we can use the following formula: Fundamental Value = Current Price + PV(Future Dividends / Required Rate Of Return). Given this information, if you believe that Sky TV’s current price reflects its intrinsic value then it would be prudent to hold or buy more shares as it may potentially increase in value over time due to increasing dividends and/or share repurchases by management.