please answer all questions on ecxel 1. Assume that the required return for Nike
ID: 2780794 • Letter: P
Question
please answer all questions on ecxel
1. Assume that the required return for Nike is 7%. Given the Dividend and the 1-year target estimate (1y Target Est), what is the value of the stock? would you buy it 2. A stock just paid a dividend of $3 and dividends are expected to grow at 5% per year forever. If the required return is 11%, what is the fair price of the stock?
3. A stock will pay a dividend of $2 next year, $2.50 in2 years and $3 in 4 years. You expect that you could sell the stock for $75 at that time. If you have a required return of 10% for this stock, what is the fair value? If the price of the stock is $65, should you buy it?
NIKE, Inc. (NKE) NYSE-Nasdaq Real Time Price Currency in USD Add to watchlist 55.20 +0.13 (+0.24%) As of 3:39PM EDT. Market open Summary Chart Conversations Statistics Profile Previous Close Open Bid 90.06B 0.50 23.50 2.35 55.07 Market Cap 55.15 Beta 55.26 x 700 PE Ratio (TTM) 55.27 x 2100 EPS (TTM) 4.60-55.32 Eanings Date Ask Dec 18,2017 Day's Range 52 Week Range49.31-60.53 Volume Avg. Volume Dec 22, 2017 Forward Dividend 0.72 (1.29%) Ex-Dividend Date 2017-08-31 59.00 & Yield ,787,017 9,772,487 y Target EstExplanation / Answer
1-
value of stock = dividend paid + present value of 1 yr target price
dividend paid =
0.72
present value of 1 yr target price = target price/(1+r)^n
59/(1.07)^1
55.14019
value of stock
.72+55.14
55.86
2-
dividend declared
3
growth rate
5%
expected dividend = dividend paid*(1+grwoth rate)
3.15
required return
11%
fair value of stock = expected dividend/(required return-growth rate)
52.5
3-
Year
cash flow
present value of cash inflow = cash inflow/(1+r)^n r= 10%
1
2
1.818182
2
2.5
2.066116
3
3
2.253944
3
75
56.34861
fair value of share
sum of present value of cash flow
62.48685
No I would not buy the stock as it fair value is 62.49 which is less than the market value of 65 so stock is over valued would not be purchased
1-
value of stock = dividend paid + present value of 1 yr target price
dividend paid =
0.72
present value of 1 yr target price = target price/(1+r)^n
59/(1.07)^1
55.14019
value of stock
.72+55.14
55.86
2-
dividend declared
3
growth rate
5%
expected dividend = dividend paid*(1+grwoth rate)
3.15
required return
11%
fair value of stock = expected dividend/(required return-growth rate)
52.5
3-
Year
cash flow
present value of cash inflow = cash inflow/(1+r)^n r= 10%
1
2
1.818182
2
2.5
2.066116
3
3
2.253944
3
75
56.34861
fair value of share
sum of present value of cash flow
62.48685
No I would not buy the stock as it fair value is 62.49 which is less than the market value of 65 so stock is over valued would not be purchased