Mandy Herr — an investment analyst at Crimson Investment Management (CIM) — is currently following technology stocks. Herr works with her supervisor, Jeremy Sparks — a portfolio manager for institutional investors — to determine appropriate investments for their clients. Herr is tracking the stock of Crown Technologies (CT), a well-known competitor in the industry. She has compiled the following information about the stock.
While gathering information about Crown Technologies, Herr figured out that the company experienced a significant shift from equity to debt financing last year. This year, the CEO plans to issue a significant amount of equity to replace debt in its current capital structure. Herr found the financial statements of the firm difficult to interpret because of the poor quality of accounting disclosures. In addition, many items not presented in the financial statements were excluded from the footnotes.
Herr is also evaluating the stock of Paper and Plastic Manufacturing Company Limited (PPMCL). She has compiled the following information for her analysis:
Sparks wishes to estimate the value of Petroleum Exploration Limited (PEL) stock. The company earned an EPS of $5.12 and paid dividends of $2.34 over the past year. Based on his analysis, Sparks estimates the long-term earnings and dividend growth rate for the firm at 5.5%. The current market price of the stock is $65.78. Sparks’ estimate of the required rate of return for the stock is 12%.
Sparks has also been following a non-cyclical stock with a market price of $78.05. The stock has earned an average EPS of $1.56 over the past 5 years and is expected to earn a similar amount in the foreseeable future. The stock’s beta is 1.13, the market risk premium is 5.5%, and the risk-free rate is 4%.
While having lunch, Herr and Sparks discussed the appropriateness of the dividend discount model for valuation purposes. Herr made the following comments:
Statement 1: “The Gordon Growth Model is appropriate for use when the growth rate is less than the required rate of return. The model also accommodates the possibility of negative growth rates.”
Statement 2: “:Provided the DDM model is correctly applied, it’s appropriate for common stock valuation, even if the company being analyzed engages in share repurchases.”
question: Given the information about Crown Technologies, is the Dividend Discount Valuation Model or the FCFF Valuation Model more appropriate to value CT’s stock?
|Year||EPS ($)||DPS ($)|
Get Finance homework help today
We aim at 100% customer satisfaction. As such, we never compromise on the quality of our assignment services. Our homework helpers craft each paper carefully to match the requirements on the instruction form.
We receive many applications from writers around the world daily. Nevertheless, we only choose the cream of the crop to tackle your “help with homework” requests. Hence, our homework helpers are highly-qualified individuals who maintain our quality policy.
We maintain a fair pricing policy for all our homework help services. Our pricing system generates quotations based on the requirements of each paper.
At My Homework Writers, we guarantee all students swift delivery of their assignments. We understand that time is an essential factor in the academic world. We, therefore, ensure that all assignments are delivered on or before the agreed deadline.
We maintain a zero-plagiarism policy in all our essay papers. Our assignment writers stick to the students’ instructions to deliver plagiarism-free papers. We are also keen to avoid any chance of similarities with previously written papers.
We understand that you might run into trouble once in a while when working with our system. In the event that you do run into trouble, please get in touch with our support agents and they will immediately provide you with assistance.
Feel free to contact us via the Chat window or email: firstname.lastname@example.org.
Follow these simple steps to get your homework done
Fill in the order form and provide all details of your assignment.
Choose the payment system that suits you most.
You will be able to track the progress of your paper from our system.
Once your paper is ready, we will email it to you.
Myhomeworkwriters website holds a reputation for providing high-quality assignment writing services. You only need to give us all the requirements for your “do my homework” order, and our homework paper writers will give you the best results.
We have highly qualified essay writers to assist you whenever you place in "help with my homework" order. Our essay writing service is designed to help students get good grades.
Our admission essay writing help will assist you to secure a position at your desired learning institution. We will help you craft a top-notch personal statement paper. Our writers who know how to write a college admission essay will help you get the college admission you are longing for.
Our team of professional editors will help you organize your paper, paraphrase it, and eliminate any possible mistakes. Also, we will help you check on plagiarism to ensure that your final paper possesses quality and originality.
My homeworkwriters harbors specialists who can handle your technical papers order. Our “write my homework” services cover all academic areas you can think of. The simplicity or complexity of the paper does not affect the quality of assignment writing services.