User Account

All Pages

Valuation results with the current share price in the market

Assignment Help Financial Management
Reference no: EM131334541

Select ONE of the four companies provided by your professor for analysis. Go to Yahoo finiace , companies to chose from BA, BMI, DIS

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

Assume a 12.5% discount rate.

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.

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

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:

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

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

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).

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

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

Reference no: EM131334541

Questions Cloud

Draw the state transition diagram for this code : Assuming that this code is used for binary data transmission over a binary symmetric channel with crossover probability of 10-3, find a bound on the resulting bit error probability.
Who will have more money at retirement : Both Kim and Chris will retire at age sixty-seven, and their 401(k) plans average a 12 percent annual return. Who will have more 401(k) money at retirement?
Primary market transaction : Recently, Hale Corporation announced the sale of 2.5 million newly issued shares of its stock at a price of $21 per share. Hale sold the stock to an investment banker, who in turn sold it to individual and institutional investors. This is a primary m..
Production of chocolate and coffee : Suppose the north and south are trading cities and have the following production of chocolate and coffee: North output per hour is 2 chocolate and 8 coffee.
Valuation results with the current share price in the market : Select ONE of the four companies provided by your professor for analysis. Go to Yahoo finiace , companies to chose from BA, BMI, DIS. Estimate a growth rate for your firm's Dividends per Share.  Compare and contrast your valuation results with the cu..
Compare the calculated present values : Compare the calculated present values, and discuss them in light of the fact that the undiscounted total cash flows amount to $150,000 in each case.
Manufacturing facility that produces widgets : 1. Suppose you are hired to manage a small manufacturing facility that produces Widgets.
Provide quantitative estimates of likely pre and postmerger : Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor.
Complete a detailed master budget for muse : The Case: Project MUSE Empire-building Group Ltd - initial 12-month financial forecast for start-up business plan. Complete a detailed master budget for MUSE for the first twelve months. Your master budget must contain all necessary schedules, and b..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the portfolio beta

You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 10 percent in Stock S, and 50 percent in Stock T. The betas for these four stocks are 1.46, 1.44, 1.28, and 1.66, respectively. What is the portfolio beta?

  Blue water designs is preparing a bond offering

Blue water designs is preparing a bond offering with a 7% coupon rate and a face value of $1000. The bonds will be repaid in 5 years. The company plans to issue the bonds at par value me pay interest semi annually. Given a discount rate of 6%, what s..

  What is the expected net income for your firm next year

The forecast for your firm indicates there's a 20% chance that Net Income will be $200,000, a 50% chance it will be $300,000, and a 30% chance it will be $400,000. Assume your firm is zero-growth and pays all its net income in dividends each year Als..

  Common stock account balance change after the split

Prezario's has 225,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $1,690,000. The company just announced a 2-for-1 stock split. By how much does the common stock account balance change aft..

  When valuing firm from entity versus equity perspective

What are the main differences when valuing a firm from an entity versus an equity perspective? List any 2 disadvantages of using the dividends discounted approach when valuing a firm.

  About an investment deal

Your friend has given you a hot tip about an investment deal that will pay off $6,000 a year at the end of each of the next three years. If your required rate of return for investments with this degree of risk is 7%, approximately how much is the inv..

  Holding a well-diversified portfolio of assets

Explain why a firm needs to hedge if stockholders are holding a well-diversified portfolio of assets?

  What is the value of a perpetuity

What is the value of a perpetuity that pays $100 every 6 months forever? The discount rate quoted on an APR basis is 6.5%.

  Arbitrage argument by constructing two appropriate portfolio

Prove via a no-arbitrage argument by constructing two appropriate portfolios that the value of an American call is equal to the value of a European call.

  Explain the payout policy of firms

Assess the growth of the firm in terms of its amount of total assets. Where have funds for growth come from? How does this relate to the firm's payout policy

  Considering new project whose data-equipment cost

Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4.

  Discuss public transportation in negative-positive

Brief summary of the video clip (no more than two paragraphs) Does the video clip discuss public transportation in negative, positive or neutral terms? Who are the stakeholders in the video clip (what groups/persons/communities are discussed)?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd