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RODNEY BUCKMIRE MOD2- SLP FIN301 Part I: Forecast of share price of Wal-Mart The trend in share price of Wal-Mart shows that, the price was quite stable over the period. Although growth in shares price was negative in 2006 and 2009 but over a period of time investors were getting a significant return on their investments. The market price of share is increasing with an average growth rate of 3.7225% over the last five years. This average growth rate can be used to forecast the future price of the stock of Wal-Mart. Based on this average growth rate and consideration of all the risks, it can be estimated that the share price will be $55.4395 for next year. It is forecasted on the basis of average growth in shares price over the years. This share price would increase the market value of 100 shares equal to $5543.95. The change in the share price of Wal-Mart from year 2005 to 2009 is shown in table below - Year Share price Growth in share price 2005 $46.8 2006 $46.18 -1.32% 2007 $47.53 2.92% 2008 $56.06 17.95% 2009 $53.45 -4.66% Total growth in share price 14.89% Average growth in share price 3.72% Future price of share $55.4395949 Market value of shares (100 ? - 55.4395949) $5543.95949 (Yahoo finance, 2011). The estimation of the share price of Wal-Mart is quite accurate and significant as it has fewer amounts of risk and change in the price of share - Fluctuation in Share Price The fluctuation in shares price of Wal-Mart from year 2005 to 2009 was not much significant. The share price was neither too high nor too low over the period. Price of shares was quite stable between years 2005 to 2009. Share price in 2005 was $46.80, while $53.45 in 2009. A continuous increase in the price of share can also be seen that also predict an increase in the share price. According to growth in share price over the last five year, it can be forecasted that the share price of Wal-Mart would be higher in one year. Risk Analysis The risk analysis is also an important concept to forecast the share price of an organization. The risk in the share price can be estimated with the beta and the fluctuation in the share price of
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Wal-Mart. The beta of the stock is 0.26, which is less than one. It explains that, Wal-Mart stock is not a risky investment. Above table also shows that price of stock increased from 2005 to 2009. The annual growth rate Wal-Mart was quite significant during 2005 to 2009 in the period of economic slowdown. The financial performance of stocks was also good in this period and at the same time it also shows the stability in shares price. It has a credit rating of 4 as well as it has 'A++' rating for financial strength in both stock price stability and earnings predictability that is a good indicator of less amount of risk in the stock of Wal-Mart (Wal-Mart: Low Risk Stock at Current Price, 2011). So, the stock of Wal-Mart is not risky for investment purpose. Selection of Investment Option
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