Question
go to yahooFinance.com and use the last five years of Target's stocks to calculate the following. Part A-Fundamental Valuation: 1. Estimate a growth rate for
go to yahooFinance.com and use the last five years of Target's stocks to calculate the following.
Part A-Fundamental Valuation:
1. Estimate a growth rate for your firm's Dividends per Share.
2. Assume a 12.5% discount rate.
3. Calculate an estimated value of a share of the stock using the constant-growth model, also known as the Gordon growth model.
4. Compare and contrast your valuation results with the current share price in the market.
5. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?
Part B - Relative Valuation:
1. Estimate a growth rate for your firm's Earnings per Share (EPS).
2. Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years.
3. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model.
4. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain.
5. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain.
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