H ASS S CHOOL OF B USINESS U NIVERSITY OF C ALIFORNIA AT B ERKELEY UGBA 103 A VINASH V ERMA H OMEWORK 5 1. According to Table 5.7 on page 101 of the 9 th edition of the text: Ticker P0 (Price 2007) EPS 1 r PVGO = P 0 - EPS 1 /r PVGO/P0 CMI $118.18 $12.03 0.157 $41.56 35% DOW $39.90 $ 4.11 0.125 $7.02 18% MSFT $29.86 $1.57 0.123 $17.10 57% SBUX $35.42 $0.985 0.092 $24.71 70% Update this table by (1) using the price on the close of business on 7/17/09 (or any other date this week so long as you specify the date), (2) looking up EPS 1 or computing it by taking trailing twelve months EPS and multiplying it by one plus the last year’s earnings growth, and (3) re-computing columns (5) and (6) assuming that r , the market capitalization rate that the text mentions in column (4) has remained unchanged. There is no single correct answer, and everybody who attempted the question and cited source of data gets full credit. 2.
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Net Present Value,
Dividend yield, market capitalization rate, Mathematical finance, Basic financial concepts, Gordon model