Part 2: Common Stock Valuation
Part 2 of this assignment is to help you understand and demonstrate how to value common stocks. From a managerial point of view, it is important to understand how decisions can be analyzed in terms of alternative courses of action and their likely
impact on a firm’s value. Thus, it is necessary to know how common stock prices can be estimated before attempting to measure how a particular decision might affect a firm’s market value.
Use the company your group picked for your Group Company Project. Estimate your company’s common stock price, using one of the valuation models presented in the assigned readings or outside readings. Please note that you cannot use “zero growth model” for this assignment. If the company you picked for your Group Company Project does not pay dividend, you need to find another publicly traded company that pays dividend.
Provide explanation of the model you used and explain why it is appropriate to use for your company’s stock. Be sure to explain how you arrived at any assumptions regarding values used in the model. Determine whether your company appears to be correctly valued, overvalued, or undervalued based on your company’s stock current price and model (calculation) result. Finally, explain why your company’s stock appears to be over-, under-, or correctly valued.