On the basis of the dividend history you uncovered in question 5 and your assessment of XOM’s future dividend payout policies, do you think it is reasonable to assume that the constant growth model is a good proxy for intrinsic value? If not, how would you use the available data in Thomson One to estimate intrinsic value using the nonconstant growth model?

Access the Thomson ONE problems though the ThomsonNOW Web site. Use the Thomson

ONE—Business School Edition online database to work this chapter’s questions.

Estimating ExxonMobil’s Intrinsic Stock Value In this chapter we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell.

While estimating a stock’s intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the data available in Thomson One to arrive at a quick “back of the envelope” calculation of intrinsic value.