Microsoft (MSFT) Homework - Financial Modeling - Stock Valuation

Determine the intrinsic value per share for Microsoft at the end of the fiscal year using a "two-stage" model (use the following information to construct the model):

1. Assume D0 is current annual dividend per share listed in Bloomberg, Thomson Reuters or in another free source on the web.

Assume that in "first stage" (lasting 5 years), MSFT's dividend per share grows by the "Next 5 years" growth estimate . (Be prepared to justify how would you choose this growth rate.....)

Assume that MSFT's dividend per share is expected to grow by x% per year = Mean Growth rate forever AFTER the five-year "first stage" growth is completed.

Calculate MSFT's cost of equity or compare it to another cost of equity from a different provider (Thomson Reuters, Bloomberg or an independent analyst report you can find online for free)

Show formulas, calculations and interpretation. Have a nice table with your assumptions (CAGR using historical growth rates, independent analysts' estimates, management guidance, most recent growth rate etc- like we did in class). Submit it in electronic format attaching the screenshots from Bloomberg screens or from other provider where you got the data from.

1.Build a table and a chart with the main operating segments for the most recent past year with the following columns: Revenues, % of each segment in Total Revenues, Operating Income, % of each segment in Total Operating Income

2.Build a graph with the annual dividend growth rates since 2005 to the present.Add the EPS growth rates to the same chart for the same period of time.

3.What is Microsoft's stock intrinsic value using the Gordon constant growth model?

4.What is Microsoft's stock intrinsic value using a 2 stage growth model? How accurately does the model above value a share of MSFT stock?

5.What was the closing price at the end of the trade day on March 12 , 2021?

6.What was the closing price at the end of the fiscal year? Attach a chart with daily stock price performance for the past 12 months. Add the EPS to the same chart.

7.What are the possible problems with the models? Please comment on the strengths and weaknesses of each valuation approach.

8.Did you encounter any difficulties or challenges?

9.Take screenshots of the data you used and attach them next to your calculations.

10.Would you buy/sell/hold this stock? Why? Do you trust your result? Why? Why not?

Attach the reports you used.