Explain the three types of risk and beta, and how these concepts relate to a company’s required rate of return.
Find your company’s beta from a credible source.
Compare your company’s beta to the market beta of 1.0.
Calculate the company-specific required rate of return using the CAPM formula.
Show all calculations.
Use the beta you determined for your chosen company
Use a risk-free rate of 2.0%.
Use 6.0% as the market risk premium.
Compare the company-specific required rate of return you calculated to the required return based on size that you used for the constant growth formula
Determine whether the company-specific required rate of return higher or lower than the rate of return based on size that you used for the constant growth formula
Explain the difference in required rate of returns
Recalculate both estimates (the low-end and the high-end) of the stock price using the constant growth formula.
Use the company’s specific required rate of return you determined using the CAPM.
Show all calculations.
Compare each of the two recalculated stock prices to the current stock price per share of the company.
State whether each recalculated stock price (low-end and high-end) is above or below the current market price.
State whether each recalculated stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
State your recommendation for your concluded stock price for the company.
Use either the high-end stock price or the low-end stock price from the constant growth formula using the CAPM required rate of return.
Justify the conclusion of value for your stock based on the most important financial facts from the prior weeks’ analysis.
Must cite where the financial statement information comes from (e.g., Yahoo! Finance or Mergent) For more information on Walmart Valuation Conclusion check out : https://www.youtube.com/watch?v=OfR6PrjhjO4
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