Task • individual • upload word document or pdf with solutions Formalities: • Wordcount: 900 words maximum, 600-900 word

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Task Individual Upload Word Document Or Pdf With Solutions Formalities Wordcount 900 Words Maximum 600 900 Word 1 (34.47 KiB) Viewed 93 times

Task Individual Upload Word Document Or Pdf With Solutions Formalities Wordcount 900 Words Maximum 600 900 Word 2 (73.1 KiB) Viewed 93 times

Task Individual Upload Word Document Or Pdf With Solutions Formalities Wordcount 900 Words Maximum 600 900 Word 3 (35.91 KiB) Viewed 93 times

Task • individual • upload word document or pdf with solutions Formalities: • Wordcount: 900 words maximum, 600-900 words normal • Cover, Table of Contents, References and Appendix are excluded of the total wordcount. • Font: Arial 12,5 pts. • Text alignment: Justified. • The in-text References and the Bibliography have to be in Harvard's citation style. Submission: Week 12 - Via Moodle (Turnitin). During the class of week 12. Weight: This task is a 40% of your total grade for this subject. It assesses the following learning outcomes: • To be able to conduct equity valuation • Understand the idea of valuation using comparables

Exercise 1 (20 points): XYZ tech is based in European Union. Share price of XYZ is traded at 60 euro per share. Company is paying dividends once a year. Expected dividend next year is about 1.2 euro per share. Return on equity is equal to 0.10. Question 1.1: Using Gordon model find implied growth rate of the company XYZ (10 points) Question 1.2: You are worrying that company might be overvalued. Forward P/E ratio in tech sector is about 20. Analysts (whom you trust) expect that earnings per share will be 2 euro per share. Use relative (multiples) valuation method to estimate "fair" share price. Compare your estimate to the actual share price and make a conclusion whether company is overvalued or no? (10 points) Exercise 2 (30 points): Procter & Gamble will pay an annual dividend of $2 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. What is the value of a share of Procter & Gamble stock if the firm's equity cost of capital is 10%? Exercise 3 (20 points): (a&b 10 points each): Now is Year 0. iDoc, a health service company, just paid a dividend of $1.50 You expect iDoc to increase its dividends by 10% per year for the next two you through Year 2), and thereafter by 3% per year. The appropriate annual discount rate equity cost of capital) for iDoc is 8% (a) Use the Gordon Growth model to estimate the share price of Doe right now, Le in Yer 0. (b) What is the expected sure price of iDoc in Year 17

Exercise 4 (12 points): Theoretical question (150 words maximum) Explain what are the pros and cons of the comparable/multiples valuation of the stocks? What are the most popular multiplicators for stock valuation? Exercise 5* (8 points): Practical valuation using P/E ratio. Pick a stock of the publicly traded US-based company of your choice. What is the industry of the company? Use average industry P/E ratio and EPS (earnings per share) of the company to define the "fair" price of the stock. Hint: you might find this data useful: http://pages.stern.nyu.edu/-adamodar/New_Home Page/datafile/pedata.html