Dividend Growth Model and Capital Asset Pricing Model (CAPM) in an Introductory Finance Course

The dividend growth model and Capital Asset Pricing Model (CAPM) are typically covered in an introductory finance course at an undergraduate level. In this paper, I show that an instructor can enhance students’ learning and stimulate their interest in these models and related concepts by incorporating a real-world example of stock valuation into teaching the course. The example should be appropriate for this introductory course in that it enables students to learn real-world finance, while not overwhelming them with the process that is too complicated. I use a timely example of Kenvue, Inc. which is a consumer health company and formerly the Consumer Healthcare division of Johnson & Johnson. Kenvue was spun off in November 2021 and first traded under the stock ticker KVUE in May 2023. Despite the insufficiency of direct stock price data, I demonstrate step-by-step how students can practically obtain other related data and information mostly from the internet and apply the dividend growth model and CAPM formulae along with Excel Spreadsheets to find a fair value Kenvue stock. Students can replicate the process for valuation of other dividend paying stocks as well.