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Personal Finance (BUSN 3300)

Financial Planning Assignments

Fall 2022

1. Refer to Step 8 of the Stock Portfolio Assignment Stock Valuation: Assume each company stock has an expected (constant) dividend growth rate of 1.35% and a required rate of return of 10.7%.

(a) Calculate the intrinsic value of each company stock you purchased. (b) Determine whether the price you paid for the stock was just right, overvalued or undervalued

· Intrinsic value in this method means the value of the stock is based solely on the expected rate of growth of the dividend the company pays.

Note: If the price you paid was more than the value you calculated the stock was overvalued. If the price you paid was equal to the value you calculated the price was just right. If the price you paid was less than the value you calculated the stock was undervalued.

Formula: P = D0(1 + g)/ (R – g); where:

P = stock price; D0 = current dividend; R = Required rate of return; g = constant growth rate

Variables

Company 1

Company 2

Company 3

Company 4

Dividend when you purchased the stock (D0)

4.00%

0.58%

2.31%

3.00%

Dividend Growth Rate (g)

1.35%

1.35%

1.35%

1.35%

Required Rate of Return (R)

10.70%

10.70%

10.70%

10.70%

Intrinsic Value (P)

43.3583

6.2870

25.0394

32.5187

Purchase Price (price you paid)

118.28

155.81

128.48

331.48

b) Company 1 – overvalued

Company 2 – overvalued

Company 3 – overvalued

Company 4 – overvalued

Sheet1

Part 1
Required Selection 1 Selection 2 Selection 3 Selection 4
Company Name Digital Realy Trust, Inc. Apple Inc. QUALCOMM Incorporated The Goldman Sachs group, inc.
Company Symbol (Ticker) (DLR) (AAPL) (QCOM) (GS)
Website Visited finance.yahoo.com finance.yahoo.com finance.yahoo.com finance.yahoo.com
Date Visited 9/3/22 9/3/22 9/3/22 9/3/22
Stock Features
Price to Earnings Ratio (P/E Ratio) 118.28 25.75 11.39 7.49
Current Dividend ($) 4.88 0.92 3 10
Dividend Yield (%) 4.00% 0.58% 2.31% 3.00%
Earnings per Share (EPS) 4.58 6.05 11.28 44.28
Beta 0.32 1.23 1.24 1.39
Market Capitalization: 34.74 2.504 144.283 113.153
Part 2: Purchase the stocks you selected. Allocate your cash ($10,000) among the stocks
Stocks Purchased: Only small change may be unspent
Company Ticker/symbol Date Purchased # of Share (n) Price per Share (p) Total Cost (C) = (n x p)
DLR 9/3/22 10 118.28 1182.8
AAPL 9/3/22 12 155.81 1869.72
QCOM 9/3/22 15 128.48 1927.2
GS 9/3/22 15 331.48 4972.2
        9951.92
Part 3: Sell all your stocks and calculate the results
Stocks Sold
Company Ticher/Symbol Date Sold # of Share (n) Price per share (p) Total Sale ( S ) = (n x p) Gain (Los)s (S – C)
DLR 12/5/22 10 109.16 1091.6 -91.2
AAPL 12/5/22 12 146.63 1759.56 -110.16
QCOM 12/5/22 15 123.3 1849.5 -77.7
GS 12/5/22 15 371.54 5573.1 600.9
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