I’m studying for my Economics class and need an explanation.
1. Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial
portfolio using zero, constant or variable growth models with a market return at 8% and at
12%. [Note that the growth rate must be less than the required rate of return.] Make sure
you list the date of the valuation and the closing share price of your firm’s stock. Each
firm’s required rate of return will depend on its beta.
2. Is the stock of each of these companies over or undervalued?
3. What is the expected return using the CAPM model?
4. Prepare a time series ratio analysis (liquidity, activity, debt, and profitability). Identify any
events during the period that may have caused the stocks’ prices to increase or decrease,
explaining how these events affect the stocks’ prices.