Please help me ASAP FIRM ABERCROMBIE Ensure that the firm is actually paying a dividend Although the professor has screened the stocks so most of them should be paying a dividend, it is possible that some have stopped paying a dividend If you find that your stock is no longer paying a dividend, stock doing the assignment and go to the professor to obtain a new stock To determine if the stock is paying a dividend, go to the yahoo finance web page Look at the Key Statistics page on the right side This will give you the current dividend (in dollars) and the current dividend yield (in percent) You need the divided in dollars to value the stock Make an assessment of the growth of the firm Growth estimates can be obtained from yahoo finance in the analysts section You should use earnings growth estimates for your g If there are no analyst growth estimates, you will have to the history of the firm to calculate growth estimates Go to the income statements of the firm and calculate the change in net income over the past year by comparing this years net income to last years net income You will have to select the discount rate for the firm Initially, you can run the model with an arbitrary growth rate of 10 , for instance However, you should also look up the beta of the stock and use the capital asset pricing model to calculate the discount rate for the firm You should show the ACTUAL calculations for this discount rate Using the dividends in part 1, the growth rate g in part 2, and the discount rate in part 3, calculate the stock price by discounting the future dividend stream You should hand in a table with the following information You do not have to use this exact table, but it is a good one to use In addition, you should show the exact calculations you made with numbers plugged into the Gordon growth model Firm Name ABERCROMBIE FITCH CL A Past Dividend Growth Rate Source of growth rate (analyst forecast, estimated, etc ) Stock beta CAPM expected rate of return Gordon Growth Model price Actual stock price Date of stock price Questions to answer Did you find that your stock was overvalued or undervalued based on the Gordon growth model What does that imply about this stock Should you buy it Short it Note if your growth rate is very high (higher than your discount rate) the Gordon growth model will not work If you get such a high growth rate, assume a lower growth rate and make a note of this in your calculations This means that the Gordon growth model will not provide an estimate of the stock price, but a minimum stock price

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 02, 2024

Please help me ASAP! FIRM: ABERCROMBIE Ensure that the firm is actually paying a dividend. Although the professor has screened the stocks so most of

Please help me ASAP!

FIRM: ABERCROMBIE

Ensure that the firm is actually paying a dividend. Although the professor has screened the stocks so most of them should be paying a dividend, it is possible that some have stopped paying a dividend. If you find that your stock is no longer paying a dividend, stock doing the assignment and go to the professor to obtain a new stock. To determine if the stock is paying a dividend, go to the yahoo finance web page. Look at the Key Statistics page on the right side. This will give you the current dividend (in dollars) and the current dividend yield (in percent). You need the divided in dollars to value the stock.
Make an assessment of the growth of the firm. Growth estimates can be obtained from yahoo finance in the analysts section. You should use earnings growth estimates for your g. If there are no analyst growth estimates, you will have to the history of the firm to calculate growth estimates. Go to the income statements of the firm and calculate the change in net income over the past year by comparing this years net income to last years net income.
You will have to select the discount rate for the firm. Initially, you can run the model with an arbitrary growth rate of 10%, for instance. However, you should also look up the beta of the stock and use the capital asset pricing model to calculate the discount rate for the firm. You should show the ACTUAL calculations for this discount rate.
Using the dividends in part 1, the growth rate g in part 2, and the discount rate in part 3, calculate the stock price by discounting the future dividend stream.
You should hand in a table with the following information. You do not have to use this exact table, but it is a good one to use. In addition, you should show the exact calculations you made with numbers plugged into the Gordon growth model.

Firm Name:	ABERCROMBIE & FITCH -CL A
Past Dividend:
Growth Rate:
Source of growth rate (analyst forecast, estimated, etc.)
Stock beta:
CAPM expected rate of return:
Gordon Growth Model price:
Actual stock price:
Date of stock price:

Questions to answer:

Did you find that your stock was overvalued or undervalued based on the Gordon growth model? What does that imply about this stock? Should you buy it? Short it?

Note: if your growth rate is very high (higher than your discount rate) the Gordon growth model will not work. If you get such a high growth rate, assume a lower growth rate and make a note of this in your calculations. This means that the Gordon growth model will not provide an estimate of the stock price, but a minimum stock price.