1. Ecolab (ECL): The following table contains historical dividends and free cash flows for the company....
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1. Ecolab (ECL): The following table contains historical dividends and free cash flows for the company. Dividend Model: Calculate the growth in dividends and the average growth in dividends. Use this as your estimate of future dividend growth. Use 2022 dividend as Do. Use 10% as your stockholder rate of return (rs) estimate. Calculate the value of the stock. Calculate the value of the stock using an 8.5% rate of return. FCF Model: Calculate the TVM growth rate. This is not useful, so you will use 4% as your g assumption. Use a discount rate of 7%. Use the average of all FCFs as your FCF. The debt for this company is $9,026.5M and the number of shares is 284.7M. Find the value of one share of stock. Calculate rs = (D1/P0) +g: The current stock price is $156.87. Use this stock price to calculate your expected rate of return using the dividend model assumptions. CAPM Model: The stock beta is .98. Use beta to calculate the rate of return. Assume the risk-free rate is 4.25% and the market risk premium (rm-rf) is 8%. ELC 2017 2018 2019 2020 2021 2022 DIV 1.52 1.69 1.85 1.89 1.95 2.06 FCF 1403.1 M 1093.5 M 1472.0 M 1972.1 M 1224.8 M 1470.8 M 1. Ecolab (ECL): The following table contains historical dividends and free cash flows for the company. Dividend Model: Calculate the growth in dividends and the average growth in dividends. Use this as your estimate of future dividend growth. Use 2022 dividend as Do. Use 10% as your stockholder rate of return (rs) estimate. Calculate the value of the stock. Calculate the value of the stock using an 8.5% rate of return. FCF Model: Calculate the TVM growth rate. This is not useful, so you will use 4% as your g assumption. Use a discount rate of 7%. Use the average of all FCFs as your FCF. The debt for this company is $9,026.5M and the number of shares is 284.7M. Find the value of one share of stock. Calculate rs = (D1/P0) +g: The current stock price is $156.87. Use this stock price to calculate your expected rate of return using the dividend model assumptions. CAPM Model: The stock beta is .98. Use beta to calculate the rate of return. Assume the risk-free rate is 4.25% and the market risk premium (rm-rf) is 8%. ELC 2017 2018 2019 2020 2021 2022 DIV 1.52 1.69 1.85 1.89 1.95 2.06 FCF 1403.1 M 1093.5 M 1472.0 M 1972.1 M 1224.8 M 1470.8 M
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To calculate the value of the stock using the dividend model we need to first calculate the growth in dividends and the average growth in dividends Gr... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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