1. Review the Sherwin-Williams example below. 2. Select ONE of the four companies provided by your professor for analysis. -EXXON MOBILE -YAHOO -WALMART -MCDONALDS 3. Write a paper on the following: a. Part A-Fundamental Valuation: Estimate a growth rate for your firm's Dividends per Share. Assume a 12.5% discount rate. Calculate an estimated value of a share of the stock using the constant- growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model. Compare and contrast your valuation results with the current share price in the market. Provide the date of the current share price. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the current market valuation? b. Part B - Relative Valuation: Estimate a growth rate for your firm's Earnings per Share (EPS). Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the current edition of the textbook). 4. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain. 5. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain. 1. Review the Sherwin-Williams example below. 2. Select ONE of the four companies provided by your professor for analysis. -EXXON MOBILE -YAHOO -WALMART -MCDONALDS 3. Write a paper on the following: a. Part A-Fundamental Valuation: Estimate a growth rate for your firm's Dividends per Share. Assume a 12.5% discount rate. Calculate an estimated value of a share of the stock using the constant- growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model. Compare and contrast your valuation results with the current share price in the market. Provide the date of the current share price. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the current market valuation? b. Part B - Relative Valuation: Estimate a growth rate for your firm's Earnings per Share (EPS). Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the current edition of the textbook). 4. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain. 5. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain
