Module 2 case_516_p | Business & Finance homework help

Check this work, need both excel and word file done very very carefully, will pay $15, chk n confirm, need 100% original work in 22 hours max

Stock Valuation

Mr. Hillbrandt is impressed with your ability to explain financial concepts so he asks for help with learning about stock valuation. Mr. Hillbrandt really liked the examples you provided last time (module 1), so it seems as if you need to sit down and create some relevant examples for this topic too. Below is some information that helps you brush up on the topic.

Read this article related to the intrinsic value of stock, paying special attention to the section entitled “Constant Growth Model”:

Alvarez, S. (2015). What is the intrinsic value of stock? Investopedia. Retrieved fromhttp://www.investopedia.com/articles/basics/12/intrinsic-value.asp

Now, let’s work the following problem:

A company just paid an annual dividend of $2.00 per share. Dividends are anticipated to grow at a rate of 8% per year forever. The stock’s beta is 1.5, the risk-free rate is 2.5%, and the expected return on the overall stock market is 7.5%. What’s the intrinsic value of the company’s common stock?

Using the formula:

Stock Price = D1 ÷ (k – g)

Where:
D1 = dividend for the coming year
k = required rate of return (NOTE: k must be greater than g)
g = growth rate of dividends
(Note: Decimals and not percentages must be used for the model to work)

1) To calculate the dividend for the coming year, we need to multiply the last dividend by the expected dividend growth rate. And so:

D1 = $2.00 x 1.08 = $2.16

2) Find the Market risk premium using the following formula:

Market risk premium = Expected return on stock – Risk free rate

= 7.5% – 2.5%

= 5%

3) Then, to find k, or the required rate of return, use the following formula: 

k = risk free rate + [market risk premium x beta]

= 2.5% + (5% * 1.5)

= 10%

4) g = 8% (or 0.08) growth rate of dividends

5) Stock Price = D1 ÷ (k – g)

= $2.16 ÷ (.10 – .08)

= $2.16 ÷ .02

= $108.00 (ANSWER)

5) Check your answer with this online calculator: http://www.zenwealth.com/businessfinanceonline/SV/CGStockCalculator.html

Now, work the following problems:

A company just paid an annual dividend of $3.25 per share. Dividends are anticipated to grow at a rate of 5% per year forever. The stock’s beta is 1.2, the risk-free rate is 3.5%, and the expected return on the overall stock market is 5.5%. What’s the intrinsic value of the company’s common stock? ANSWER = $379.17
A company just paid an annual dividend of $2.35 per share. Dividends are anticipated to grow at a rate of 6.25% per year forever. The stock’s beta is 1.6, the risk-free rate is 4.25%, and the expected return on the overall stock market is 8.5%. What’s the intrinsic value of the company’s common stock? ANSWER = $51.48

Required:

Part I consists of three questions.

Do the computations for the example below. Show the computations step by step, so Mr. Hillbrandt can easily follow your examples.

1. The company’s common stock dividends are anticipated to grow at a constant 5.5% growth rate per year going forward. The company just paid an annual dividend (that is, D-zero) of $3 per share. What’s the intrinsic value of the stock based on the following required rates of return?

6%
8%
10%
12%

2. If the stock is currently selling for $40 per share, is the stock a good buy? Interpret the results and justify your decision.

3. The company just paid an annual dividend of $1.50 per share. Dividends are anticipated to grow at a stable rate of 10% per year forever. The stock’s beta is 1.2, the risk-free rate is 4%, and the expected return on the overall stock market is 11%. What is the intrinsic value of the company’s common stock?

Part II

Select one company that is a member of the Dow Jones Industrial Average. The listing is here:

http://finance.yahoo.com/q/cp?s=^DJI+Components

Apply the Dividend Discount Model and justify why you think that the stock is currently undervalued, overvalued, or fully valued. Please be sure to state your assumptions and justify your results. What is the relationship, if any, between stockholders’ wealth and financial decisions? 

Computations (use Excel).

Use Excel to make the part I and II computations. Make sure you separate the two parts and organize the information, so Mr. Hillbrandt easily understands.

Memo (use Word).

Explain the concept and computations in part I to the CEO. Start with an introduction and end with a conclusion. Each of the four or five paragraphs should have a heading.

Short Essay – Part II (use Word).

Let’s look at this issue from an investor’s perspective and respond to the question above. Do research as needed and respond to the questions posed in part II.

Start with an introduction and end with a summary or conclusion. Use headings. Don’t forget to reference your sources. Maximum length of two pages.
Assignment Expectations

Each submission should include two files: (1) An Excel file; and (2) A Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency