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tInvestments discussion topic III: Stock Valuation Based on the stocks Spirit airlines, American airlines and United airlines, value one of the stocks from following steps:
tInvestments discussion topic III: Stock Valuation
Based on the stocks Spirit airlines, American airlines and United airlines, value one of the stocks from
following steps:
a Forecast future sales and profits.
b Forecast future EPS and future Dividends if the company pays dividends
c Interpret the Beta of the company.
d Use CAPM to calculate the stocks required rate of return.
e Use estimated PE ratio and the forecast EPS to calculate the intrinsic value I.
f Use Dividend Discount Model and the forecast dividends to calculate the intrinsic
value II
g Compare the two intrinsic values you estimated in step e and step f discuss which
value is more valid.
h Compare the intrinsic value you estimated and the stocks market price, give buy
or sell recommendations.
Note: include a written report and the
excel worksheet which shows your work.
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