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Pick a publicly owned company from the Dow Jones Industrial Average (DJIA) stock market index. The chosen company must be a publicly-traded dividend-paying company. Use
Pick a publicly owned company from the Dow Jones Industrial Average (DJIA) stock market index. The chosen company must be a publicly-traded dividend-paying company. Use appropriate dividend discount/growth model to find the intrinsic value of the stock. Review the assumptions of the model. In calculating the growth rate for the company, use sustainable growth rate method. For estimating the required return, use the capital asset pricing model (CAPM). As an estimate of the risk free rate, use the current yield to maturity of a 10 year T-bill. Estimate firm beta using the simple market model in Excel. You may use one of the two ways to calculate Beta using Excel. The first is to use the "-slope" formula: the X variable series is the return on the market and the Y variable series is the return on your chosen stock. A second alternative is to calculate the Beta directly as the covariance between the two return series, divided by the variance of market returns. Find the actual stock price on July 31, 2018' intrinsic stock value to the actual July 31, 2018' stock price. Does the market undervalue or overvalue the stock? Based on the above analysis, do you plan to undertake any transaction (buy/sell) in the stock? Why or why not? Compare your estimated
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