Ik on this chapter's questions. Please note that website information use Ones over time, and these changes may limit your ability to answer some of these chan EXXON MOBIL CORPORATION'S INTRINSIC STOCK VALUE questions. 119 cribed the various factors that influence Int to estimate a stock's intrinsic lysts n estor can assess whether it makes sense to buy icelw their estimated intrinsic values use stock prices and the approaches that ue. By comparing these intrinsic value estimates to the current sense to buy or sell a particular stock. Stocks trading at a alues may be good candidates for purchase, whereas stocks c far below rices far in excess of their intrinsic value may adinga stock's intrinsic value is alculation of intrinsic value Discussion Questions mating a the Internet to find financial data in order to arrive at a quick "back-of-the-envelope" be good stocks to avoid or sell. Although a complex exercise that requires reliable data and good judgmen that ses of this exercise, let's take a closer look at the stock of Exxon Mobil Corporation (XOM) U For 1. as Yahoo! Finance, Google Finance, and MSN Money to find the company's current s Pertoock performed relative to the market over the past few months? events impacting the company's stock price, or have things been relatively quiet? ance relative to the overall market in recent months. What is Exxon Mobil's current stock price and see its stock price? How has Check recent headlines on the website to see the company's recent news stories. Have there been any recent , provide a starting point for gauging a company's relative valuation, analysts often look at a company's price- o-earnings (P/E) ratio. Go to the website's summary quote or key statistics screen to see XOM's forward P/E 3. o, which uses XOM's next 12-month estimate of eamings in the calculation, and to see its current P/E ra What are the firm's forward and current P/E ratios? 4. To pu t XOM's P/E ratio in perspective, it is useful to see how this ratio has varied over time. (If you go to MSN Money, you will find a 10-year summary of key statistics. In addition, the price ratios screen shows its current P/E ratio, its 5-year high, and its 5-year low.) Is XOM's current P/E ratio well above or well below its latest 5-year average? Explain why the current P/E deviates from its historical trend. On the basis of this information, does XOM's current P/E suggest that the stock is undervalued or overvalued? Explain. To put the firm's current P/E ratio in perspective, it is useful to compare this ratio with that of other companies in the same industry. To see how XOM's P/E ratio stacks up to its peers, refer to Google Finance's Related Companies screen. (If you click "Add or remove columns," you will find that you can obtain comparisons of a number of key statistics for either the most recent year or quarter.) For the most part, is XOM's P/E ratio above below that of its peers? In Chapter 4, we discussed the various factors that these factors explain why XOM's P/E ratio differs from its peers? Explain. In the text, we discussed using the discounted dividend model as simple as possible, let's assume at first that XOM's dividend is expected to grow at a constant rate of annually over time. So, g-5%. If so, the intrinsic value equals Di/(h-g), where D, is the expected annual dividend 1 year from now, r, is the stock's required rate of return, and g is the dividend's constant growth ra Go back to the summary (overview) screen and find XOM's current dividend. Multiply this dividend by 1+ g to 5. may influence P/E ratios. Can any of to estimate a stock's intrinsic value. To keep things 5% 6. arrive at an estimate of Di Ik on this chapter's questions. Please note that website information use Ones over time, and these changes may limit your ability to answer some of these chan EXXON MOBIL CORPORATION'S INTRINSIC STOCK VALUE questions. 119 cribed the various factors that influence Int to estimate a stock's intrinsic lysts n estor can assess whether it makes sense to buy icelw their estimated intrinsic values use stock prices and the approaches that ue. By comparing these intrinsic value estimates to the current sense to buy or sell a particular stock. Stocks trading at a alues may be good candidates for purchase, whereas stocks c far below rices far in excess of their intrinsic value may adinga stock's intrinsic value is alculation of intrinsic value Discussion Questions mating a the Internet to find financial data in order to arrive at a quick "back-of-the-envelope" be good stocks to avoid or sell. Although a complex exercise that requires reliable data and good judgmen that ses of this exercise, let's take a closer look at the stock of Exxon Mobil Corporation (XOM) U For 1. as Yahoo! Finance, Google Finance, and MSN Money to find the company's current s Pertoock performed relative to the market over the past few months? events impacting the company's stock price, or have things been relatively quiet? ance relative to the overall market in recent months. What is Exxon Mobil's current stock price and see its stock price? How has Check recent headlines on the website to see the company's recent news stories. Have there been any recent , provide a starting point for gauging a company's relative valuation, analysts often look at a company's price- o-earnings (P/E) ratio. Go to the website's summary quote or key statistics screen to see XOM's forward P/E 3. o, which uses XOM's next 12-month estimate of eamings in the calculation, and to see its current P/E ra What are the firm's forward and current P/E ratios? 4. To pu t XOM's P/E ratio in perspective, it is useful to see how this ratio has varied over time. (If you go to MSN Money, you will find a 10-year summary of key statistics. In addition, the price ratios screen shows its current P/E ratio, its 5-year high, and its 5-year low.) Is XOM's current P/E ratio well above or well below its latest 5-year average? Explain why the current P/E deviates from its historical trend. On the basis of this information, does XOM's current P/E suggest that the stock is undervalued or overvalued? Explain. To put the firm's current P/E ratio in perspective, it is useful to compare this ratio with that of other companies in the same industry. To see how XOM's P/E ratio stacks up to its peers, refer to Google Finance's Related Companies screen. (If you click "Add or remove columns," you will find that you can obtain comparisons of a number of key statistics for either the most recent year or quarter.) For the most part, is XOM's P/E ratio above below that of its peers? In Chapter 4, we discussed the various factors that these factors explain why XOM's P/E ratio differs from its peers? Explain. In the text, we discussed using the discounted dividend model as simple as possible, let's assume at first that XOM's dividend is expected to grow at a constant rate of annually over time. So, g-5%. If so, the intrinsic value equals Di/(h-g), where D, is the expected annual dividend 1 year from now, r, is the stock's required rate of return, and g is the dividend's constant growth ra Go back to the summary (overview) screen and find XOM's current dividend. Multiply this dividend by 1+ g to 5. may influence P/E ratios. Can any of to estimate a stock's intrinsic value. To keep things 5% 6. arrive at an estimate of Di