In the Section 3: Dividend Analysis and Preliminary Valuation assignment, you will compute the of the company’s stock value based on historical dividend data for your company and a market-based equity rate of return. In this analysis, you will use the constant growth formula to compute two estimates of the stock price, a high-end value and a low-end value. Analysts frequently assess the stock value using a range of values, based on reasonable assumptions for a high-end and a low-end range.
Once you have calculated two stock values, you will compare the company’s calculated values compared to the current market price of the stock. This comparison will help you determine if the stock is currently under-valued or over-valued, and will help you determine your recommendation of buy, hold, or sell. Analysts prepare value estimates based on historical data for the company as well as an understanding of expected future equity rates of return. It is important to understand that the constant growth formula provides an estimate of value, and analysts, like all humans, can be both right and wrong. The inputs used in the formula will greatly impact the value conclusion.
Prior to beginning work on this assignment,
In your paper, address the following five parts in a Word document:
Part 1: Dividend Analysis (two to three paragraphs):
Part 2: Preliminary Valuation: (two to three paragraphs)
The Section 3: Dividend Analysis and Preliminary Valuation paper
Note: Since this is Section 3 of the Week 5 final project, there is no need for an introduction paragraph.
Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.
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