What is gis intrinsic value using residual income

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Reference no: EM132200327

Question - General Mills (GIS), currently trading for $62.13 per share, has the following financial information (all numbers in millions): total assets of $21,913, total liabilities of $17,004, earnings before interest and taxes of $645, depreciation of $600, capital expenditures of $300, change in net working capital of $50, and 592 shares outstanding. They have a tax rate of 35%, a payout ratio of 92%, and a beta of 0.45. Assume a market return of 10% and a risk free rate of 2%.

a. What is GIS's intrinsic value using constant growth DDM?

b. What is GIS's intrinsic value using constant growth free cash flow?

c. What is GIS's intrinsic value using residual income?

d. Is GIS over or under valued? Why?

Reference no: EM132200327

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