1. Go to FactSet or any stock brokerage form click on the company/security tab and enter the symbol for Home Depot (HD). Record the stock price, the EPS for 2016, the number of shares outstanding, and the long term growth rate to your spreadsheet. You may find most of this under Key Statistics.

2 To use the constant growth model we need to estimate the cost of Home Depot equity. To do this we will use the CAPM. This requires an estimate of the company beta, the risk-free return, and the market risk premium. The beta can be found in the Price History Tab in the volatility section we may use either the 3 or 5 year adjusted beta.

3. The risk-free rate can be found in the Markets TAB - Fixed Income. For the risk-free rate I suggest the 10 year treasury rate. For the market risk premium we will adopt the 7%. This is a high estimate. It can be justified by the current economic and political uncertainty. The dividend estimate for 2017 is found in the estimate tab subtab All Estimates. It is in the Per Share Table. 3. To determine the stock value based on the discounted free cash flow method for the constant dividend model we use the CAPM estimate for the cost of equity ( R_f + b(R_m R_f))and the perpetual growth estimate. We will assume the perpetual growth rate in dividends is 4%. The formula is Price2016= dividend 2017/(required return perpetual dividend growth rate). This is roughly the past growth rate for the US economy.

4. Perform a what if analysis. To do this let the perpetual growth vary from 3% -5% in one percent increments and the required return to vary from 6% - 9% in one percent increments.

5. a. We will then use the long term estimated growth rate to estimate dividends for 2018.2019,2020, and 2021. Thus the dividend for 2018 is (1+long term growth rate)*dividend2017.

b. We now want to find the value of dividends 2022-imfinity. We next need a forecast of dividends for the constant growth. We will assume after the high growth period, 2017-2021, dividends will grow at 4% forever. We will call 4% the perpetual growth rate. Therefore, the dividend in 2022 is the dividemd2021*1.04.

c. Next apply the constant dividend growth model to find the value of the stock in 2021. The formula is Price2021= dividend2022/(required return perpetual dividend growth rate).

d. Find the net present value of the dividends. This includes the dividends in 2017-2021 and the value of the stock in 2021. This may be found in cell E13.

6. To calculate an estimate of Home Depots price based on the method of comparables Click on the overviews tab and choose comps.

7. Click on Selected Financial tab above the Co. name. See above chart. A drop down menu appears. Click on edit and then valuation.

8. Choose book value per share FY1, price to book-value FY!,earnings per share FY1, Price-Earning atio FY1,sales per share FY1, and price-sales per share. Then click on the download icon to load to a spreadsheet.. On the spreadsheet apply the method of comparables.