Find out a projection of the state of the economy

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Questions -

1) Find out a projection of the state of the economy in the near future (e.g. growth rate, interest rates, inflation rates, unemployment rates, etc.). How will that affect your stock?

2) How sensitive is the company's industry to the state of the economy? Focus on industry sales sensitivity, operating leverage, and financial leverage.

3) Based on your investigation, what are the specific future company actions that are likely to affect its stock price? What specific facts about its environment are likely to affect its stock price?

4) Based on your answers to the previous questions (and without any further calculation), would you issue a "buy" recommendation for the stock? Explain.

5) Use the FCFE method to estimate the fair value of the stock. Start by estimating future sales. Use the percent-of-sales method to predict other necessary variables. Use the beta you have estimated to obtain a projection of the discount rate (i.e. required return, a.k.a. cost of equity). Compare the fair value and the market value.

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Reference no: EM132207758

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