Stock Valuation - 75863

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armyguy

armyguy

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Price: $20
  • From: Business, Finance
  • Due on: Wed 03 Dec, 2014 (03:54pm)
  • Asked on: Mon 24 Nov, 2014
  • Due date has passed, but you can still Post Solution.
Description

This assignment contains two parts: Part I and Part II. 

Part I

Answer these questions and show your work:

  1. A company’s common stock dividends are anticipated to grow at a constant 5.5% growth rate per year going forward.  The company just paid an annual dividend (that is, D-zero) of $3 per share.  What’s the intrinsic value of the stock based on the following required rates of return?
  1. 6%
  2. 8%
  3. 10%
  4. 12%

If the stock is currently selling for $40 per share, is the stock a good buy?  Interpret the results and justify your decision.

  1. A company just paid an annual dividend of $1.50 per share.  Dividends are anticipated to grow at a rate of 17% per year for the next five years and then reduce down to a growth rate of 8.5% per year forever.  The stock’s beta is 1.2; the risk-free rate is 4%, and the expected return on the overall stock market is 11%.  What’s the intrinsic value of the company’s common stock?

Part II

Select one company that is a member of the Dow Jones Industrial Average.  The listing is here:

http://finance.yahoo.com/q/cp?s=^DJI+Components

Apply the Dividend Discount Model and justify why you think that the stock is currently undervalued, overvalued, or fully valued.  Please be sure to state your assumptions and justify your results.  What’s the relationship, if any, between stockholders’ wealth and financial decisions? 

Please submit your assignment and interpret the results.  The complete assignment should be 3-4 pages.

Assignment Expectations

You are expected to: 

  • Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph. If those paragraphs are not interesting, they never read the body of the paper.
  • Answer the Case Assignment question(s) clearly and provide necessary details.
  • Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
  • Provide citations to support your argument and references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references.
  • Type and double-space the paper.
  • Whenever appropriate, please use Excel to show supporting computations in an appendix, present financial information in tables, and use the data computed to answer follow-up questions.  In finance, in addition to being able to write well, it’s important to present information in a professional manner and to analyze financial information.  This is part of the assignment expectations and will be considered for grading purposes
1 Solution for Stock Valuation
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