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 stock$$s required rate of return.

e$.$ Use estimated P$/$E 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 stock$$s market price, give buy

or sell recommendations.

$$ Note: include a written report and the

excel worksheet which shows your work.