Question
Larry and Curley are brothers. They're both serious investors, but they have different approaches to valuing stocks. Larry, the older brother, likes to use the
Larry and Curley are brothers. They're both serious investors, but they have different approaches to valuing stocks. Larry, the older brother, likes to use the dividend valuation model. Curley prefers the free cash flow to equity valuation model. As it turns out, right now, both of them are looking at the same stocklong dashAmerican Home Care Products, Inc. (AHCP). The company has been listed on the NYSE for over 50 years and is widely regarded as a mature, rock-solid, dividend-paying stock. The brothers have gathered the following information about AHCP's stock:
Current dividend (Upper D 0 )equals= $2.10 /share
Current free cash flow (FCF0 )equals= $1.5 million
Expected growth rate of dividends and cash flows (g )equals=7 %
Required rate of return (r )equals=14 %
Shares outstandingequals=450,000 shares
How would Larry and Curley each value this stock?
The stock price from Larry's valuation is
The stock price from Curley's valuation is
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