1. Review theSherwin-Williams example below.

2. Use Target to analysize.

3. 1. Part A-Fundamental Valuation:

      • 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. Provide the date of the current share price.

      • Respond to this question:What changes in the variables would be necessary in your valuation to best approximate the current market valuation?

   2. 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 current edition of the textbook).

4. Respond to this question:Would you characterize your stock as undervalued or overvalued? Explain.

5. Respond to this question:Based on your valuations in parts A and B, would you invest in this stock? Explain.

FINA 301: SHERWIN-WILLIAMS EXAMPLE

Supporting Information for Financial Analysis Exercise III

Part A: This first part of the exercise asks you to select Target and apply the constant- growth model in an attempt to value a share of that stock. Here is the equation for the model, Equation 8-6 in the current edition of the textbook:

P0 = =,

where

P0 = current price of the stock

D0 = dividend per share at the end of the last period (last year)

D1 = dividend per share at the end of period 1 (next year)

i = discount rate

g = constant growth rate

Sherwin-Williams Co (The) (NYS: SHW)
Report Date	12/31/2017	12/31/2016	12/31/2015	12/31/2014	12/31/2013
Currency	USD	USD	USD	USD	USD
Dividends per common share	3.44	3.36	2.68	2.20	2.00