Applying the Constant Growth Model
Assume that the market expected return is 12% and the risk-free...

Question

Applying the Constant Growth Model
Assume that the market expected return is 12% and the risk-free rate is 3%. Each team needs to pick a stock and get the following information on it fromYahoo Finance:

Beta, next-5-years growth estimate
  
  In addition, you need to determine the required rate of return on the stock you are evaluating.
  Determine whether the constant growth is appropriate for valuing the stock.
  Calculate its value and compare to its market price.
  If your calculated price is significantly different from the market price, what adjustment to the growth rate or the required return do you recommend?
  Each team should upload one response regarding their assumptions on the evaluation parameters and their findings.

Simran · Accepted Answer

Sheet1
	Assume that the market expected return is 12% and the risk-free rate is 3%.
	Dell Technologies Inc. (DELL)
	Beta
	0.95
	Next-5-years growth estimate
	g = r- D1/P
	    =  0.1155 - 0.33 / 34.56 = 0.106 or 10.6 % 
	In addition, you need to determine the required rate of return on the stock you are evaluating.

Applying the Constant Growth Model Assume that the market expected return is 12% and the risk-free rate is 3%. Each team needs to pick a stock and get the following information on it fromYahoo...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment