Homework 5 - Stock Valuation Inputs Inflation Rate Real Discount Rate Real k Earnings Retention Rate Outputs Nominal Discount Rate(k Period Inflation

Homework 5 - Stock Valuation Inputs Inflation Rate Real...

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Yves Dewa David Worrell Stocktwo 10/27/2014 Stock Valuation Two Stage Inputs Inflation Rate 3% Real Discount Rate ( Real k) 9% Earnings Retention Rate 50% Outputs Stage 2: Nominal Discount Rate (k) 12.3% Infinite Stage 1: Explicit Forecast Horizon Historical Data Horizon(ROI>k) (ROI = k) Period -2 -1 0 1 2 3 4 5 6 Inflation Rate 2.8% 3.1% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Real Return on Investment (Real ROI) 22.3% 22.7% 19.0% 17.0% 15.0% 13.0% 11.0% 9.0% Nominal Return on Investment (ROI) 25.7% 26.5% 22.6% 20.5% 18.5% 16.4% 14.3% 12.3% Real Growth Rate in Dividend (Real g) 11.2% 11.4% 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% Nominal Growth Rate in Dividend (g) 14.3% 14.8% 12.8% 11.8% 10.7% 9.7% 8.7% 7.6% Nominal Dividend / Share $5.10 $5.84 $6.64 $7.49 $8.37 $9.27 $10.17 $11.05 $11.89 Continuation Value / Share $256.51 Sum of Future Div. & Cont. Value.Shr $7.49 $8.37 $9.27 $10.17 $267.56 PV of Future Div. & Cont. Value / Shr $6.67 $6.64 $6.55 $6.40 $150.00 Intrinsic Value / Share $176.26
Yves Dewa David Worrell Stockdyn 10/27/2014 Stock Valuation Dynamic Chart Inputs Inflation Rate 3.0% 6 Earnings Retention Rate 50.0% 5 Outputs Real Discount Rate ( Real k) 9% 7% 8% 9% 10% 11% 12% $235.19 235.190168 235.19017 235.19017 235.19017 235.19017 235.19017 Stage 2: Nominal Discount Rate (k) 10.2% Infinite Stage 1: Explicit Forecast Horizon Historical Data Horizon(ROI>k) (ROI = k) Period -2 -1 0 1 2 3 4 5 6 Inflation Rate 2.8% 3.1% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

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