Company XYL Valuation This is the section where you discuss valuation results You should use a minimum of 3 methods you must use at least 1 relative valuation method and 1 absolute method See text and notes for various methods available These methods must be clearly labeled For Absolute method DDM and or DCF DDM acceptable (for B grade level for this section) Must be multi stage forecast 4 years, then from terminal year, assume a reasonable terminal CF as discussed in class (in the text of your written report, you can discuss whether this is a valid terminal point or not) For details, see lecture notes on multi stage DDM DCF, and stock report spreadsheet template For interim g over first 4 years, use one of the non historical methods for estimating g Explain here how you did that, and this must match what you do in the spreadsheet DCF required for a possible A grade on this section As with DDM, must be multi stage etc as discussed above Forecast cash flows should be shown in a table in the appendix along with the growth rates For both for the Risk Free rate, use a constant 1 for the Market return, use the S P500, average of monthly returns for July 2017 to June 2022 (for those with a NZ stock, use the NZX50 over same period) For terminal growth, use 2 (you may use something else, but state your assumptions) Final Recommendation For each method, you will have an estimated target price From the 3 (or more) methods you use, make a judgement call on what the final target price should be This will generally be a weighting, where you place the most weight on the method you deem most correct, and least weighting on a method you feel has problems (e g , due to input information available) If you do this (recommended), include a small table showing your weights Risks to the Final Recommendation Your target price (and therefore recommendation) are probably most sensitive to some specific assumptions Describe those here This is not the place for firm risks, which comes later (see below) This section should conclude with the same information at the top of page 1 Target Price, Current Price, and Recommendation (buy, sell or hold)

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Company: XYL Valuation This is the section where you discuss valuation results. You should use a minimum of 3 methods; you must use at least

Company: XYL

Valuation

This is the section where you discuss valuation results.

You should use a minimum of 3 methods; you must use at least 1 relative valuation method and 1 absolute method. See text and notes for various methods available.

These methods must be clearly labeled.

For Absolute method; DDM and/or DCF

DDM: acceptable (for B grade level for this section)

Must be multi-stage; forecast 4 years, then from terminal year, assume a reasonable terminal CF as discussed in class (in the text of your written report, you can discuss whether this is a valid terminal point or not). For details, see lecture notes on multi-stage DDM/DCF, and stock report spreadsheet template.

For interim g over first 4 years, use one of the non-historical methods for estimating g. Explain here how you did that, and this must match what you do in the spreadsheet.

DCF: required for a possible A grade on this section. As with DDM, must be multi-stage etc as discussed above. Forecast cash flows should be shown in a table in the appendix along with the growth rates.

For both:
- for the Risk-Free rate, use a constant 1%
- for the Market return, use the S&P500, average of monthly returns for July 2017 to June 2022 (for those with a NZ stock, use the NZX50 over same period).
- For terminal growth, use 2% (you may use something else, but state your assumptions)

Final Recommendation: For each method, you will have an estimated target price. From the 3 (or more) methods you use, make a judgement call on what the final target price should be. This will generally be a weighting, where you place the most weight on the method you deem most correct, and least weighting on a method you feel has problems (e.g., due to input information available). If you do this (recommended), include a small table showing your weights.

Risks to the Final Recommendation: Your target price (and therefore recommendation) are probably most sensitive to some specific assumptions. Describe those here. This is not the place for firm risks, which comes later (see below).

This section should conclude with the same information at the top of page 1 Target Price, Current Price, and Recommendation (buy, sell or hold).