Assignment 3: Stock Valuation

Overall Goal: we are slowly building the report to be presented at the end of the semester.

At this time,

1) Use Excel to value your stock and formulate the decision if your stock should be

bought or sold. You will be uploading only Excel work for this assignment.

You should apply one of the valuation techniques we studied in class to the valuation of

your selected stock.

Stock Valuation Techniques covered in class:

• Discounted Dividend Model (DDM).

• Corporate Valuation Model (DCF or WACC).

• Relative Valuation Techniques (Multiples Approach).

For all of those, assume that the discount rate, which is equal to the investors' required rate

of return, is 10%.

If you select one of the Discounted Cash Flow Methods (DDM and WACC):

1. When selecting your method, consider changes in sales and expenses (from financial

statements) that imply assumptions about growth rates of the company over time. Once

you understand how to compute each measure of cash flow, you can estimate cash flow

for each year.

2. You are allowed to make assumptions. But must clearly state your assumptions

and justify them.

3.

Estimate the value of your company's Common Stock using one of the methods.

For this, create a new Excel sheet; title it "Discounted Cash Flow Method". Set Up a

table with data and your assumptions. Show your calculation of the Present Value (PV)

of the stock. The calculation must be formula-driven.

4. Compare your estimated value of your stock with the current market price of

the company's common stock (the price that is current for your stock in the

market (Yahoo/Finance).

For this, record the price of your stock with the date you obtained that price. Compare

two values side-by-side.

5. Based on this comparison, make a recommendation of whether it makes sense to buy or

sell your selected stock.

For this, type your recommendation next to the price comparison.