4. Compare the result of your calculations with the current stock price. Is the stock overvalued, undervalued, or properly valued? Why? In accordance with your findings, is it reasonable to buy the stock? Why? Please explain your answer. The beta listed for Exxon Mobil Corp is 1.34. Beta is a numeric value that measures the fluctuation of a stock to changes in the overall stock market. A beta of 1.34 means, theoretically this stock is 34% more volatile than the market. By multiplying the beta value of stock with the expected movement of the index, the expected change in the value of the stock can be determined. Example: id beta is 1.34 and the market is expected to move up by 10% then the stock should move up by 13.4% (1.34*10). D) K = R + beta x (K-R) Assuming Risk Free Rate of 2% S&P Market Return = 10% Exxon Dividend = 8.3%, Exxon Beta 1.34, 4.278 = 2% + 1.34 X (10% - 8.3%) 2. Calculate the company's sustainable growth rate. Please show your work. g=ROE *(1- Dividend payout ratio) g=(6.10)*(1-207.14) g--1257.454 B. Apply the Gordon model (constant growth rate model) to calculate the intrinsic (economic) value of the stock. Please show your work. p= dividend per share / rate of return - constant growth rate expected for dividends p= 3.48/4.278-(-1257.454) p=3.48/1261.732 p=0.002758 4. Compare the result of your calculations with the current stock price. Is the stock overvalued, undervalued, or properly valued? Why? In accordance with your findings, is it reasonable to buy the stock? Why? Please explain your answer. The beta listed for Exxon Mobil Corp is 1.34. Beta is a numeric value that measures the fluctuation of a stock to changes in the overall stock market. A beta of 1.34 means, theoretically this stock is 34% more volatile than the market. By multiplying the beta value of stock with the expected movement of the index, the expected change in the value of the stock can be determined. Example: id beta is 1.34 and the market is expected to move up by 10% then the stock should move up by 13.4% (1.34*10). D) K = R + beta x (K-R) Assuming Risk Free Rate of 2% S&P Market Return = 10% Exxon Dividend = 8.3%, Exxon Beta 1.34, 4.278 = 2% + 1.34 X (10% - 8.3%) 2. Calculate the company's sustainable growth rate. Please show your work. g=ROE *(1- Dividend payout ratio) g=(6.10)*(1-207.14) g--1257.454 B. Apply the Gordon model (constant growth rate model) to calculate the intrinsic (economic) value of the stock. Please show your work. p= dividend per share / rate of return - constant growth rate expected for dividends p= 3.48/4.278-(-1257.454) p=3.48/1261.732 p=0.002758
