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What is the potential drawback of such analysis

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Question - Multistage growth model A. Calculate the cost of equity of Disney, using the following information:

i. Estimate the beta of Disney by downloading five-year daily data between 01/01/2016 to 21/12/2020 for Disney and S&P 500 from Yahoo. Report the estimation results (please include at least the estimated coefficients and their standard error; no need to include this raw data in your answer or appendix).

ii. US Market premium 7.755% and the risk-free rate 1.49%. Suppose the following information is given from an analyst's forecast: the next year's Earningas' forecast is at 2.04 per share and the dividend payout ratio is 40% (in 2021). The initial dividend growth rate is 27% from 2022 for a 7-year period. Then it enters a 12-year transition period when the permanent growth rate ends at 5.36%.

B. Calculate Disney's value per-share using a multistage dividend growth model (use the excel template given in the seminar). (10 marks) C. Compare the estimate with the market price (please specify the day of the price used in your analysis). What does the market price imply about the potential growth rate might be to justify the pricing? Discuss how the valuation can be used to inform an investment decision. What is the potential drawback of such analysis? What more information and analysis may be useful to improve your valuation estimation?

Reference no: EM133004279

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