Growth Rate for Firm’s Dividends per Share Assignment | Homework for You
June 11th, 2020
Merck & Co Ink (MRK)
- Part A-Fundamental Valuation:
- Estimate a growth rate for your firm’s Dividends per Share.
- Assume a 12.5% discount rate.
- Calculate an estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.
- Compare and contrast your valuation results with the current share price in the market.
- Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?
- Part B – Relative Valuation:
- Estimate a growth rate for your firm’s Earnings per Share (EPS).
- Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years.
- Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the textbook).
- Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain.
- Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain.Get Finance homework help today