• Recalculate both estimates (the low-end and the high-end) of the stock price using the constant growth formula.
• Use the company's specific required rate of return you determined using the CAPM.

Given:

CAPM

ERi = Rf + (ERm - Rf) * i

ERi = 2% + (6%) * 1.2

ERi = 9.2%

The formula for the high-endgrowth rate is 328.95%, 3.29:

P=D(1+g)

(rg)

P=3.00 (1+3.29)

(0.10- 3.29)

P=12.87__

- 3.19

P=--$4.34

The low-end growth rate is at 9.0%, 0.09.

P=D(1+g)

(rg)

P=3.00(1+0.09)

(0.100.09)

P=3.27_

0.01

P=$327.00

• Review your selected high-end and low-end growth rates from.
• If either growth rate is higher than the new CAPM discount rate, you must reduce your selected growth rate(s).
• Your growth rates cannot be higher than the discount rate, because the calculations will result in a negative stock price, which is not meaningful.
• Include a short, written explanation to explain the revised growth rates.
• Show your revised high-end and low-end stock price calculations
• Compareeach of thetworecalculated stock prices to the current stock priceper share of the company.
• State whether each recalculated stock price (low-end and high-end) is above or below the current market price.
• State whether each recalculated stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
• State your recommendation for your concluded stock price for the company.
• Use either the high-end stock price or the low-end stock price from the constant growth formula using the CAPM required rate of return.
• Justify the conclusion of value for your stock based on the most important financial facts from the prior weeks' analysis.