Debt Considerations and Price Valuation related to Kimberly-Clark

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Requirement #1:

Review Kimberly-Clark's 2021 Annual Report, Note 6 on Debt (p. 43). Then review KMB's bond issues, bond prices, and bond ratings.

To locate historical bond rating information for KMB go to:

then [select] Ratings. If you are asked to register, please do so.

To locate a list of KMB's current bond issues, ratings, prices and yields go to:

[select] Search, then enter KMB into the Symbol/CUSIP search box, then [select] Show Results. If you are asked to accept the User Agreement, [select] Agree.

Review the current information regarding Kimberly-Clark's debt and provide your thoughts based on our readings through Week 4 Ross, Westerfield, Jaffe and Jordan (2019). If you were managing a pension fund, how confident would you be in the quality of KMB's bonds as an investment? Explain.

Requirement #2:

Use YAHOO! FINANCE to find Kimberly-Clark's (KMB) most recent closing share price, analysts projected one-year target price and forward estimates of the dividend and the dividend yield.

Referring to Chapter 9 of Ross, Westerfield, Jaffe and Jordan (2019), compute and display your calculations projecting your own estimate of what one share of Kimberly-Clark stock should be worth today. Do not simply repeat analyst's estimates you may see on the web. Use one of these valuation methods discussed in Chapter 9: (a) the Dividend Discount Model or (b) the Price-Earnings Ratio approach.

For the Dividend Discount Model, estimate g and R as shown on pages 275-278 in the textbook.

For the Price-Earnings Ratio approach see pages 280-282. Do not make the common circular reasoning mistake of using an estimate of P/E derived directly from KMB's financial information. Instead, find P/E ratios for several of KMB's close competitors (identify them in your write-up) and use these to estimate an industry average P/E ratio (but beware of outliers).

For both approaches, you may find it useful to use financial information from annual reports, YAHOO! FINANCE, Morningstar and/or other sources of financial information on the web.

Clearly state what you think the price of one share of KMB should be. Based on this value estimate, is KMB overpriced or underpriced? Comment on the assumptions you made regarding how you developed your price estimates. Does the debt discussed in Requirement #1 concern you in recommending this stock to an investor? Why or why not?