Section III This section represents a total of 45 points (out of 100)The credit is earned for the performance of the dividend discount model and the free cash flow method approach, the valuation and the recommendation. Don't forget to justify the market risk premium, the required rate of return, and the growth rate(s) used in your models. Specifically, the credits are assigned as follows: a) 30 points for the dividend discount model and the free cash flow method approach - You must operationalize your assumptions in a discounting model. Please explicitly state and clearly explain all assumptions you use in your valuation methodology. Compare your valuation with the current price of the stock. Be careful to show what, when and how you discount them. Mention and show how sensitive your intrinsic value is to main assumptions in your model. b) 5 points Sensitivity Analysis-Consider a few key variables (e.g. WACC, terminal value) and show how sensitive your calculated share price is to fluctuations in these key variables. Present a grid, whereby you change your WACC by, say steps of 0.5% (consider both-increases as well as decreases) and the calculated share price. This analysis is meant to capture how your valuation will change as this key variable changes. An analysis of this kind is very frequently done to get sense of how sensitive your final answer is to changes in the variable you are considering. 4 c)5 points Over/Under-valued and Recommendation- Finalize your best estimate of current Vo Intrinsic Value for the firm and state if the firm is over- or under-valued. Summarize your aluation of the firm through the entire report and make an investment recommendation on this stock as a security analyst would. Finally, compare your recommendation with those made by financial analysts who cover the same company d) 5 points % Return-estimate what your return would be on this firm if you were to trade on your over / under-valuation decision and explain your estimation. Do you believe that mispricing is transitory or more permanent in nature? MAIN SOURCES: Read Chapter 13 in Bodie. Kane, and Marcus