● American Express trades on the New York Stock Exchange under the ticker symbol AXP. In 2019, AXP was paying a dividend of $1.56 and analysts forecasted five-year growth rates of 10.2 percent for AXP and 6 percent for the overall market. Assume that AXP grows at 10.2 percent for the next five years, then falls to the market growth rate thereafter. If we use a discount rate of 12 percent, what value would we place on AXP?

P 0 = $ 1_. .1_52_6 −_ ×_ . 1_10._120_ 2_ [1 −  ( _1._10_2_ 1.12 )

5

]  +  ( _1._10_2_ 1.12 )

5

[ $_1..1_52_6 _− × ._ 01_.60_ 6_ ]

= $95.51 × .0778 + .9222 × $27.56

= $7.43 + $25.42

= $32.85 This present value estimate is much less than AXP’s early 2019 share price of $98.14. Is AXP overvalued? What other factors could explain the difference?