Reference no: EM133116756

Table 1: Nike Annual Dividends for Target Corporation 

• Calculate the stock price for your selected company using the constant growth formula and the low-end dividend growth rate you determined in Part 1. Show all calculations for this estimated stock price using the low-end dividend growth rate.
  • For the required rate of return (r), use the following assumptions:
    • For a large capitalization company (greater than $10.0 billion in market capitalization) use 10.0%. 
    • For a mid-cap company (between $2.0 billion and $10.0 billion in market capitalization) use 12.0%.
    • For a small-cap company (less than $2.0 billion in market capitalization) use 15.0%.
  • Show your calculations.
• In a similar manner, calculate another estimate of the stock price for your selected company using the constant growth formula and the high-end dividend growth rate. 
  • Use the same assumptions for the required rate of return (r) that you used for the low-end stock price, other than using the high-end dividend growth rate.
  • Show your calculations.
• Compare each of the two stock prices you just calculated to the current stock price per share of the company. 
  • State whether each constant growth stock price (low-end and high-end) is above or below the current price.
  • State whether each constant growth stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market. 
• Determine your concluded stock value, based on the two calculations using the constant growth formula.

Justify your conclusion of value for your stock, using either the high-end stock price or the low-end stock price from the constant growth formula. Include least two financial facts from your Week 1 and Week 2 analyses.