Question: Option # 1 : Valuing Stocks Paper For this assignment you will use multiple valuation methods to value the stock for a company of your
Option #: Valuing Stocks Paper For this assignment you will use multiple valuation methods to value the stock for a company of your choice. Using Yahoo! FinanceLinks to an external site., select a company which pays dividends, has positive EPS for the current and next years reported results. The current year may be the prior calendar year but financial results may not yet be reported. For example in January of the current year, for a December fiscal year company, is as results are not yet reported. You will need a company paying dividends and a positive EPS on common shares to be able to apply the models. For the exercises, assume a required rate of growth of where applicable. Calculate the growth in EPS from the current year to the next years average estimates from analysts. That will be the growth rate for earning and you may assume that dividends grow at the same rate. If the growth rate exceeds use instead. You will assume these rates continue as a perpetuity if the model requires. Finally, note the recent Priceearnings PE ratio for the company. Using the most recent annual dividends and EPS calculate the following numbers: The stock value using the Constant Growth Model The stock value using the ZeroGrowth Model ignore analyst forecasts Using the forecasted EPS and the recent PE ratio, what will the stock be worth in a year? Also calculate the value assuming PE ratios of and Answer the following questions: How do the numbers above vary and why? What factors impact stock prices? Address both company and external factors. What impacts PE ratios why do they vary between companies and over time What is Freecash flow? How can it be used to value stocks?
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