This paper circulates around the core theme of Explain which of the 2 models seemed to be the most accurate in estimating the value of the stocks. Based on the material that you learn in this Phase, what would you expect to happen to the value of the stock if the growth rate, dividends, required rate together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
To fill up the first table, you will need to gather information
needed to calculate the required rate of return for each of the 3
stocks. You will need to calculate the risk-free rate for this
assignment. You will need the market return that was calculated in Phase
2, and the beta that you should be able to find on the Web site.
Company
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5-year Risk-Free Rate of Return
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Beta (?)
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5-Year Return on Top 500 Stocks
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Required Rate of Return (CAPM)
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To complete the next table, you will need the most recent dividends
paid over the past year for each stock, expected growth rate for the
stocks, and the required rate of return you calculated in the previous
table. You will also need to compare your results with the current value
of each stock and determine whether the model suggests that they are
over- or underpriced.
Company
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Current Dividend
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Projected Growth Rate (next year)
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Required Rate of Return (CAPM)
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Estimated Stock Price (Gordon Model)
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Current Stock Price
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Over/Under Priced
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In the third table, you will be using the price to earnings ratio
(P/E) along with the average expected earnings per share provided by the
Web site. You will also need to compare your results with the current
value of each stock to determine whether or not the model suggests that
the stocks are over- or underpriced.
Company
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Estimated Earning (next year)
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P/E Ratio
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Estimated Stock Price (P/E)
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Current Stock Price
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Over/Under Priced
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After completing the 3 tables, explain your findings and why your
calculations coincide with the principles related to bonds that were
presented in the Phase. Be sure to address the following:
- Explain the relationship observed between the required rate of
return, growth rate and the dividend paid, and the estimated value of
the stock using the Gordon Model.
- Explain the value and weaknesses of the Gordon model.
- Explain the how the price-to-earnings model is used to estimate the value of the stocks.
- Explain which of the 2 models seemed to be the most accurate in estimating the value of the stocks.
- Based on the material that you learn in this Phase, what would you
expect to happen to the value of the stock if the growth rate,
dividends, required rate of return, or the estimated earnings per share
were to increase or decrease? Be sure to explain each case separately.