Part A

• Estimatea growth rate for your firm's Dividends per Share.
• Assumea 12.5% discount rate.
• Calculatean estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.
• Compare and contrastyour valuation results with the current share price in the market.
• Respond to this question:What changes in the variables would be necessary in your valuation to best approximate the market valuation?

Part B - Relative Valuation:

• Estimatea growth rate for your firm's Earnings per Share (EPS).
• Determinean applicable Price-Earnings (P/E) ratio for your firm in 5 years.
• Calculatean estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the textbook).
• Respond to this question:Would you characterize your stock as undervalued or overvalued? Explain.
• Respond to this question:Based on your valuations in parts A and B, would you invest in this stock? Explain.

Attached is an example of how it should be. Answers are highlighted in yellow. Company of choice is Wal-Mart