It is often useful to perform a sensitivity analysis, where you show how your estimate of intrinsic
Question:
It is often useful to perform a sensitivity analysis, where you show how your estimate of intrinsic value varies according to different estimates of D1, rs, and g. To do so, recalculate your intrinsic value estimate for a range of different estimates for each of these key inputs. One convenient way to do this is to set up a simple data table in Excel. Refer to the Excel tutorial accessed through the ThomsonNOW Web site for instructions on data tables. On the basis of this analysis, what inputs justify the current stock price?
Access the Thomson ONE problems though the ThomsonNOW Web site. Use the Thomson
ONE—Business School Edition online database to work this chapter’s questions.
Estimating ExxonMobil’s Intrinsic Stock Value In this chapter we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell.
While estimating a stock’s intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the data available in Thomson One to arrive at a quick “back of the envelope” calculation of intrinsic value.
StocksStocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
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Fundamentals of Financial Management
ISBN: 978-0324302691
11th edition
Authors: Eugene F. Brigham, Joel F. Houston