FINC 560-02

VALUATION PART 1 HOMEWORK

FALL 2017

Required format: You should submit 1 sheet of paper with the following for each problem: the problem number, the intrinsic value, the closing price on Friday, Dec. 1,* and whether the stock is over or under valued.Nothing else should be on this sheet.If you want to submit a 2^nd file of your calculations, remember that if is in Excel, you need to show the column letters, row numbers, formulas, and gridlines.Homework not in the required format will receive a 0.

1.Coca-Cola Bottling (COKE) has a beta of 0.80.What is its required return?

2.Coca-Cola Bottling (COKE) has paid a $1.00 annual dividend for the past fifteen years.What is its intrinsic value?Compare the stock's intrinsic value to its closing price on Dec. 1.Is it over or under valued?

3.Con Ed (ED) has a 0.50 beta and a 3% growth rate.It expects its 2018 dividend to be $2.84.What is its intrinsic value?Compare the stock's intrinsic value to its closing price on Dec. 1.Is it over or under valued?

4.Con Ed's three most recent P/Es are 18.8, 15.6, and 15.9.If its 2017 EPS is expected to be $4.05, what is its intrinsic value?Compare the stock's intrinsic value to its closing price on Dec. 1.Is it over or under valued??

5.ConEd's three major competitors are FirstEnergy (P/E = 12.1), Public Service (P/E = 17.1), and Duke Energy (P/E = 20.1).Remember that ED's 2017 EPS is expected to be $4.05.Is it over or under valued

6.Use the data below and the Combined Dividends & Earnings Model to forecast HSBC's cash flows for 2018 to 2020.Then find the intrinsic value.(HSBC's ticker symbol is HSBC).Compare the stock's intrinsic value to its closing price on Dec. 1.Is it over or under valued?

EPS 2018

$4.50

Dividend 2018

$2.60

Average DPO

0.67

Growth rate

0.04

Beta

1.05

Average P/E

13.9

*To find the closing prices on Dec. 1, go to Yahoo!, and click on Finance.There will be a box on the right that says, "Quote Lookup."Put the stock's ticker symbol in the box, and press enter.If you are doing this on Friday after 4:00 p.m., the closing price is the one in large green letters.If you are doing this on Monday or Tuesday, do the steps above, and then click on "Historical Data."Enter Friday's date and you will see several stock prices.The one you want is the "Close."This is NOT the adjusted close (adj. close).