Hi, I have an assignment on stock valuation and I don't have time to do...
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Hi, I have an assignment on stock valuation and I don't have time to do it. The company chosen is Gamestop. All the questions I need to be answered are below. The valuation needs to be current data. Keep very busy days
Question 1: You will use the data available about the firm you are analyzing to create an actual valuation of a stock. You will value the stock using the Gordon Growth model. This valuation will then give you an idea of how close the estimates are typically for a stock compared to the actual stock price. The purpose of this project is to expose the student to real stocks and the data of these stocks in the overall marketplace
Students should conduct the following analysis on the stock that they have selected.
- Ensure that the firm is actually paying a dividend. Although the professor has screened the stocks so most of them should be paying a dividend, it is possible that some have stopped paying a dividend. If you find that your stock is no longer paying a dividend, stock doing the assignment and go to the professor to obtain a new stock. To determine if the stock is paying a dividend, go to the yahoo finance web page. Look at the Key Statistics page on the right side. This will give you the current dividend (in dollars) and the current dividend yield (in percent). You need the divided in dollars to value the stock.
- Make an assessment of the growth of the firm. Growth estimates can be obtained from yahoo finance in the analysts section. You should use earnings growth estimates for your g. If there are no analyst growth estimates, you will have to the history of the firm to calculate growth estimates. Go to the income statements of the firm and calculate the change in net income over the past year by comparing this years net income to last years net income.
- You will have to select the discount rate for the firm. Initially, you can run the model with an arbitrary growth rate of 10%, for instance. However, you should also look up the beta of the stock and use the capital asset pricing model to calculate the discount rate for the firm. You should show the ACTUAL calculations for this discount rate.
- Using the dividends in part 1, the growth rate g in part 2, and the discount rate in part 3, calculate the stock price by discounting the future dividend stream.
- You should hand in a table with the following information. You do not have to use this exact table, but it is a good one to use. In addition, you should show the exact calculations you made with numbers plugged into the Gordon growth model.
Firm Name: | Gamestop GME |
Past Dividend: | |
Growth Rate: | |
Source of growth rate (analyst forecast, estimated, etc.) | |
Stock beta: | |
CAPM expected rate of return: | |
Gordon Growth Model price: | |
Actual stock price: | |
Date of stock price: |
Question 2:
Did you find that your stock was overvalued or undervalued based on the Gordon growth model? What does that imply about this stock? Should you buy it? Short it?
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