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1. (2 Points) For both of your companies find out the annual dividend payments made during the fiscal years ending on December 2014, 2015, 2016, and 2017. You can find the cash dividend payments in the Statement of Cash Flows. Note that these dividend payments (as they are cash outflows) will be recorded as negative numbers. Ignore the sign. 2. (3 Points) For each year (2014, 2015, 2016, and 2017) calculate the internal and sustainable growth rates for each company. Also, calculate the average (over four years) internal and sustainable growth rates for each company. 3. (2 Points) For both of your companies find out the expected (by analysts) growth rate of earnings for the next 5 years. For this purpose my favorite source is www.finance.yahoo.com, you can use the area called Analyst Estimates to get these numbers. 4. (3 Points) For both of your companies, find the beta. You can typically find these in stock quotes of websites like finance.yahoo.com. 5. (5 Points) Find the average annual return of S&P 500 Index over the last 30 years. Consider this number as the Expected return for the market. Also find the average yield of 10-year Treasury Bonds over the last three months. Consider this average the risk-free rate. You can find the historical data in websites like finance.yahoo.com. 6. (2 Points) Using the risk-free rate, beta, and the expected market return find the expected return for both of your companies. Note that this is equal to your cost of equity. 7. (3 Points) For each of your companies, find the credit rating of that company. Try to find the average yield for bonds of companies with that credit rating. 8. (2 Points) Find out the closing price of each stock at the end of December 2017. 9. (3 Points) Using the last financial statement available (fiscal year 2017), find the share of debt and equity for both companies, assume that market value of the company is calculated using the last closing price and the average number of shares during 2017. Note that, among other places, you can find the number of shares in 10-K filings of the companies in sec.gov. 10. (2 Points) Calculate the average tax rate for each company using the income statements. This is equal to sum of taxes during 2014, 2015, 2016, 2017, divided by sum of net income during the same set of years. 11. (3 Points) Using the cost of debt in step 7, cost of equity in step 6, and tax rate calculate the cost of capital for each company. 12. (5 Points) For each company, assume that dividends will grow at their expected growth rate for the next 5 years, and then at their average internal growth rate forever, calculate the value of the stock using the dividend growth model. Assume that the required rate of return is the cost of equity you calculated in step 6. 13. (5 Points) Find out the closing price of each stock at the end of December 2017. Under the same set of assumptions about the dividend growth in Step 7, find out the required rate of return implied by the closing price of each company. 14. (5 Points) Assume again that the required rate of return is the cost of equity calculated in Step 5. Assume that the dividends will grow at the expected growth rate for the next 5 years and at a constant rate thereafter. Find out the dividend growth rate after 5 years that is implied by the closing stock price of each company. 15. (25 Points) a critical comparison of the stock valuation you obtained in Step 12 to the closing prices at the end of December 2017. Make sure to tell me whether each stock is over or undervalued. Your conclusions should be supported by the evidence provided by at the least: the financial statements and ratios you calculated in the previous assignment, reverse-engineering conclusions in steps 13 and 14. Feel free to use any other source of information as justification for your analysis as long as you properly cite such sources. A little hint: Wikipedia IS NOT a valid source regardless of the validity of information on that source. Furthermore, do not simply cite an analyst opinion without also reporting the analysis that led to the said opinion.