Project Case Study Solution

Stock Prices from Two Methods:

The stock prices from the two alternative methods are presented in the following table, with an inclusion of thethe current stock price and deviations in two pricing method from the current stock price.

Table 1:

Methods Dividend Discount Model Discounted Free Cash Flow Actual
Share Price 47.29 51.41 80.67
Difference 33.38 29.26  

Dividend Discount Model:

According to the method, the dividend discount model, the share price is 47.29, which is lower than the actual stock price of the company. The difference is almost 33.38 dollars from the valued price and actual price, which shows that the investor should not invest in this company.

Based on changes in the dividend discount model, analysts should forecast future dividend payments, increased payments of dividends and the required rate of return or cost of equity. Therefore, in many cases, theoretically fair stock prices are far from reality(Corporate Finance Institute, 2020).

Discounted Free Cash Flow Model:

According to the method, the discounted free cash flow model, the share price is 51.41, which is below than the actual stock price of the company. The difference is almost 29.26 dollars from the valued price and actual price which shows that the investor should not invest in this company……………………………..

 

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