Question
Lastyear,ASICompanypaidP1.00persharedividend.ASI'sgrowthrateisexpectedtobeconstantfor10%for2years,after which dividends are expected to grow at a rate of 5% forever. The marketriskpremiumis5%andriskfreerateis6%.ASICompany's beta of stock is1.2. The Weighted average cost of capital
Lastyear,ASICompanypaidP1.00persharedividend.ASI'sgrowthrateisexpectedtobeconstantfor10%for2years,after which dividends are expected to grow at a rate of 5% forever. The marketriskpremiumis5%andriskfreerateis6%.ASICompany's beta of stock is1.2.
The Weighted average cost of capital is 10%. ASI has an expected OperatingIncomeofP12Million.Thenon-cashdeductiblessuchas Depreciation and Amortization are expected to be P 100 Thousand and P 50 Thousand respectively. The Capital expenditure was estimatedtobeP1.8MillionandtheNetOperatingworkingcapitalis
expected to change by an increase of P 250 thousand. The market valuesoftheCompany'sdebtandpreferredstocksareP140Million and P 80 Thousand respectively. The company's estimated growth rate is 6%. The weighted average number of ordinary share outstanding is 1.5Million. Tax rate30%.
- UsingDiscountDividendmodel,Whatisthepresentvalueof terminal value or horizonvalue?
- AssumingthecurrentpriceinthemarketisP15pershare.Using DiscountDividendmodelinestimatingthe"truevalue", Whatis theintrinsicvalueofthestocktoday(P0)andidentifywhetherthestockisOvervaluedor(Undervalued)?
- Using Discount Dividend model, What is the stock price of ASIthree years from today(P3)?
- UsingtheCorporatevaluationModel,whatistheamountofMVof thefirm?
- AssumingthecurrentpriceinthemarketisP15pershare.Using the Corporate Valuation Model to estimate the "true value" ofstock,determinetheintrinsicvalueandidentifywhetherthestockisovervalued/(undervalued)?
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