I'm working on a team case study project for my business finance class where our team is
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I'm working on a team case study project for my business finance class where our team is reporting on Kimberly Clark. I have been assigned the following section and I'm struggling. I have attached the guidelines, along with financials from Kimberly Clark. Any advice?
- Section 4: Valuation of Company?s Securities and Risk Assessment
- (a)Bonds:Considerthelongest-maturitybondofthecompany.Assumingacurrentdiscountrateof6%,whatisthevalueofthisbond?
- LinktoBonds:http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=KMB&Country=USA
- My answer: PV (500MM)(1+0.06)^30=2,871,745,586.457 (2.87x10^9 per scientific calculator)
- (b) Common Stock: Consider the common stock of the company. Using the growth rate implied by the dividends paid five years ago and the most recent dividend as a constant growth rate, an expected return of 12.5% and the Constant Growth Model, calculate the value of the company?s common stock.
- (c) Using your valuation date as a reference, and the stock price information obtained,
- (i) if you purchased 100 shares of your company?s common stock 5 years ago, what would be your dollar and percentage returns on the stock?
- (ii) What is the 5-year average return on the stock?
- (iii) using the standard deviation of returns as the measure of risk, what is the volatility/risk of the stock?
- (iv) using the Coefficient of Variation as a measure of the amount of risk (volatility) per unit of return, how would you describe the relative merit of investing in this stock (hint: compare with key competitor and application market index).
- (v) Using historical stock returns data for the firm and an applicable market portfolio, run a regression of firm return (dependent variable) and market portfolio return (independent variable) and determine the beta for the stock.
- (d) Key investment risks: what industry, market, and company-specific factors may result in your company?s stock being a bad investment?
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