Estimate a growth rate for your firms earnings per share

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Reference no: EM132059753

Work with the Yahoo!Finance database and perform elements of securities analysis involving a select group of companies.

Part A-Fundamental Valuation:

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

2. Assume a 12.5% discount rate.

3. 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.

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

5. 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:

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

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

3. 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).

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

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

Reference no: EM132059753

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