Reference no: EM133061769

Emerson Electric was founded in 1890 in St. Louis, Missouri, as a manufacturer of electric motors and fans. Over the past 100-plus years, Emerson has grown from a regional manufacturer into a global technology solutions powerhouse. For more information, please visit the Emerson Electric website. Emerson Electric is a publicly own company and its stock is traded formally. In this exercise, we try to value Emerson's stock.

Go to Thomson Reuters, a prominent financial information site. Click on Markets, then Stocks, and in the search box enter Emerson Electric. Click enter, and you will see the name on the answer list provided by the search box. Click on the name to obtain the information on Emerson. [It has come to my attention that the site is not always working as it should. If this is the case, please click on the link to arrive at the relevant page: https://www.reuters.com/finance/stocks/overview?symbol=EMR.N ]

-Please answer the followings with the help of information provided by Reuters: (Under "Profile/Pricing")

-What is the current price of Emerson's stock, please include the date and time with your answer?

-What are the values of 52-week high and 52 week low, and the meaning of these statistics?

-What are the market capitalization value and its meaning?

-How many shares of Emerson's stock are outstanding?

-If we divide the market capitalization by the shares outstanding, what do we obtain? Explain.

-Find the dividend-related information Under Keymetrics/Per Share Data: [Dividend (Per Share Annual), Dividends (Per Share TTM), Dividend (Per Share 5Y)] Record the values and explain the meaning of each. Then, under Keymetrics/Valuation, record eh values of the following: Dividend Yield (5Y), Dividend Yield, Current Dividend Yield (TTM). Explain briefly the meaning of each. Are they consistent with the information you recorded from Keymetrics/Per Share Data?

-Assume that the market risk premium now is 6% and the risk-free return is 1%. Using this information and Emerson's beta as published by Reuters, please use the CAPM and compute the required rate of return for Emerson. (Please note that you are given the market-risk premium here, not the market return! Please explain the meaning of beta, and the required rate of return as part of your answer.)

-Using equation 7.18 on page 323, and substituting the computed required rate of return from (3) above in place of "expected rate of return", please compute the implied growth rate that will produce the current stock price for Emerson Electric. The implied growth rate is the overall growth rate in equation 7.18. Please note that in equation 7.18, we have D(1) but the annual growth rate in Keymetrics is D(0), and D(1)= D(0)x(1+g)

-Assume that the unanticipated inflation caused the security-market line to shift upwards of 1 percentage point. What will be the new growth rate required?

-If the market risk premium increases by 1 percent, what would be the new growth rate? [Keep the risk-free rate at 2%]