Many of topics in finance deal with individual security analysis, but there aren't a lot of real robras forrecasts about the fair value of market indices. 90 fit of returns in a portfolio come from asset allocation, or beta nisk. Finding fair value is essential for any invertor lociking to value risk and expected return in the stock market. Investing in a great company doesa't make a lot of senve if the overall market is expected to fall, since usuaty all stocks fall when the tocik market is wervalued. So, lets value the S\&P S00 Index. Because the index is composed of the largest companies in the U.S. with striet standards to be in the index, the S\&P $00 is considered a growing perpetuity. The index will never go out of buriness because the S.PP committee kicks out any declining stocis and replaces them with new profitable companies. For these reasons the SSP 500 could be considered a gowing perpetuity. Growing Perpetuity Formula PV=(rg)C1 PV = The preseat value of all future cash flows or the fair value for the inverment Cl= Next year's cash flow - Use S\&P operating camings. Go to S\&P 500 website for the ladex eaming spreadshect. Always use forward eltimates. r= Required rate of retum on S\&P 500 - Your team will have to conseruct this rate uaing a risk-free nte and an extimated equity risk premium. Your team must show their work and sources for full aredit. 8 = Long term growth rate of Cl - Your team must come up with a bert ertimate of the longterer growth rate of the S\&P 500 Index eaming. Uling data from the SSP 500 webrite, eppecially the ladex Barnings Spreaduheet, and marcer dan. calculate the fair value of the S\&P 500 index wing the growing perpenuity formula. Make sare that your inputs are all explained and the reasoning belind getting the data to populate the growing perpetaity model. 1. Construct a S4P 500 'fiir value' MS EXCEL model. It needs to solve firt the PV of the SaP 500 Index. 2. Your final answer thould an index value. Currently the inder is around 3.,600 Your answer will likely be different. b. Use Ercel to calculate each variable (CF1, rig. Equity Riak Premiam, Rick Free Rate) using the same loag term time frame. 2. Constract a Word doc eyplainine your calculations and soarces of infomation to arrive at your tcams' fair value. Dropbox all your documents and wpecedsheet