Calculate an estimated value of a share of the stock

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Reference no: EM131928735

Financial Analysis Exercise -

Purpose - The purpose of this assignment is to apply stock valuation techniques to real financial data utilizing an online database.

Overview - Throughout this course you will work with the Yahoo! Finance database and perform elements of securities analysis involving a select group of companies.

Action Items

Review the Sherwin-Williams example. (Please see attachment)

Select ONE of the four companies provided by your professor for analysis.

Write a 1-2 page (approximately 500 words) paper on the following:

Part A-Fundamental Valuation:

a. Estimate a growth rate for your firm's Dividends per Share.

b. Assume a 12.5% discount rate.

c. Calculate an estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.

d. Compare and contrast your valuation results with the current share price in the market.

e. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?

Part B - Relative Valuation:

a. Estimate a growth rate for your firm's Earnings per Share (EPS).

b. Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years.

c. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the textbook).

d. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain.

e. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain.

Attachment:- Assignment Files.rar

Reference no: EM131928735

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