Question
I'm having a really hard time understanding the step by step process of how to do this. Could you thoroughly explain the process of building
I'm having a really hard time understanding the step by step process of how to do this. Could you thoroughly explain the process of building this model? What information I need, how to plug into excel, etc. Thank you!
This section represents a total of 40 points (out of 100). The credit is earned for the performance of the dividend discount model and the free cash flow method approach, the valuation and the recommendation. Dont forget to justify the market risk premium, the required rate of return, and the growth rate(s) used in your models. Specifically, you should cover the following:
- Dividend discount model and the free cash flow method approach - You must operationalize your assumptions in a discounting model. Please explicitly state and clearly explain all assumptions you use in your valuation methodology. Compare your valuation with the current price of the stock. Be careful to show what, when and how you discount them. Mention and show how sensitive your intrinsic value is to main assumptions in your model.
- Over / Under-valued and Recommendation - Finalize your best estimate of current Vo = Intrinsic Value for the firm and state if the firm is over- or under-valued. Summarize your evaluation of the firm through the entire report and make an investment recommendation on this stock as a security analyst would. Finally, compare your recommendation with those made by financial analysts who cover the same company.
- % Return - estimate what your return would be on this firm if you were to trade on your over / under-valuation decision and explain your estimation. Do you believe that the mispricing is transitory or more permanent in nature?
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