As a new analyst for a large brokerage firm, you are anxious to demonstrate your skills you learned in your FIN503 course to prove you are worth your attractive salary. Your first assignment is to analyze the stock of CK Asset Holdings Limited, a real estate company based in Hong Kong. Your immediate superior recommends determining prices based on the dividend-discount model. The expected return on new investments is 12.4%. However, you are a little concerned because your finance professor had indicated that dividend- discount model might result in widely differing estimate when applied to real data. You are really hoping that the model will results in similar prices. Good luck with that!

1. Go to Yahoo! Finance https://finance.yahoo.com/) and enter the stock code for CK Asset Holdings Limited (1113.HK). From the main page for CK Asset Holdings Limited, gather the following information and enter it onto a spreadsheet.

a. The current stock price (last trade) is at the top of the page.

b. b. The forward dividend amount, found on the bottom right of the stock quote table.

2. Next, click Statistics on the left side of the page. From the Statistics page, find the total number of shares outstanding.

3. Next, click Analysis from the right side of the tab. From the Analysis page, find the expected growth rate for the next five years and enter it onto your spreadsheet. It will be near the very bottom of the page.

4. Next, click the Financials tab. Copy and paste the entire three years of income statements onto a new worksheet in your existing Excel file. (Note: if you are using IE as your browser, you can place your cursor in the middle of the statement, right click, and select Export to Microsoft Excel to download an Excel version.). Repeat this process for both the balance sheet and cash flow statement for CK Asset Holdings Limited. Keep all different statements in the same Excel worksheet.

5. Finally, go to Morningstar (www.morningstar.com)and enter CK Asset Holdings. From the main page, click on Key Ratios tab and then click the Full Key Ratios Data tab and calculate the average payout ratio for the prior two years.

6. To determine the stock value based on the dividend-discount model:

a. Create a timeline in Excel for five years.

b. Use the dividend obtained in Yahoo! Finance as the current dividend to forecast the next five annual dividends based on the five-year growth rate.

c. Determine the long-term growth rate based on CK Asset Holdings payout ratio (which is one minus the retention ratio) using g=Retention RateReturn on New Investment

d. Use the long-term growth rate to determine the stock price for year five using = 1

e. Determine the current stock price using: = 1 (1+)1 + 2 (1+)2 + 3 (1+)3 + 4 (1+)4 + 5 (1+)5 + () = 1 ( )

Why does your estimate differ from the actual stock price of CK Asset Holdings?