Each team must value the equity of a US-traded company. You can choose any company you would like, from any industry you wish, as long as its shares are traded in a US market. You have the option of using one of the companies selected for assignment #1 in a). Nevertheless, I would advise you to choose a relatively large company for which information and analysts’ forecasts are readily available. In addition, since you will be asked to use the Discounted Dividend Model you should choose a company that has paid and is currently paying dividends. The objective of this assignment is to become familiar with stock valuation models and apply these models to real-life scenarios in order to decide whether a stock is over-priced, underpriced, or correctly priced.
It is imperative that you cite all your sources for the data and analysis. When appropriate, you should always use graphs and tables to present your analysis and support your estimations. At the beginning of your assignment #2 written report, you should state your stock recommendation: BUY, HOLD, or SELL. When you conclude that a stock is undervalued (overvalued), you should issue a BUY (SELL) signal. However, if the stock is correctly priced you should issue a HOLD signal. Do not become emotionally attached to a stock. Try to objectively value the stock. Remember that a great company can have a “bad” stock and vice versa. Your report must be concise and look “professional”.
In order to complete assignment #2 each team must accomplish the following tasks:
Compute the cost of equity using the CAPM model. Clearly state and explain the logic underpinning the choice of the risk-free rate of return and the market risk premium
Analyze the current and future situation of the economy (1-2 pages). Some of the topics you should discuss are the expected GDP growth of the US/world economy, the expected employment growth, the expected inflation rate, and the expected performance of the US dollar vis-à-vis of the…