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Finance Assignment - Part A (Fundamental Valuation) and Part B (Relative Valuation)

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Question;Write a 1 page paper on the following Using Caterpillar (CAT)http://finance.yahoo.com/q/ks?s=CAT+Key+Statistics: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.

 

Paper#48197 | Written in 18-Jul-2015

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