1.Johnson & Johnson (JNJ), currently trading for $119.24 per share, has the following financial information (all numbers in millions): total assets of $133,411, total liabilities of $62,261, earnings before interest and taxes of $17,167, depreciation of $3,746, capital expenditures of $3,500, change in net working capital of $500, and 2,740 shares outstanding. They have a tax rate of 35%, a payout ratio of 65%, and a beta of 0.85. Assume a market return of 10% and a risk free rate of 2%.

a.What is JNJ's intrinsic value using constant DDM?

b.What is JNJ's intrinsic value using constant growth free cash flow?

c.What is JNJ's intrinsic value using residual income?

d.Is JNJ over or under valued? Why?

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