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Estimating Exxon Mobil Corporation's Intrinsic Stock Value Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In this chapter, we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell Although estimating a stock's intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the Internet to find financial data in order to arrive at a quick "back-of-the- envelope" calculation of intrinsic value. 7. The required return on equity. r s is the final input needed to estimate intrinsic value For our purposes, urn can assume a number (say, 9% or 10%) or you can use the CAFM to calculate an estimate of the cost of equity, using the data available on the Internet. (For mow details, look at the Taking a Closer look exercise for Chapter 8.) Having decided on your best estimates for D 1 r s and g, you can calculate XOM's intrinsic value. Be careful to make sure that the long-run growth rate is less than the required rate of return. How does this estimate compare with the current stock price? Does your preliminary analysis suggest that XDM is undervalued or overvalued? Explain.

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

Solutions

Chapter
Section
Chapter 9, Problem 7TCL
Textbook Problem

Estimating Exxon Mobil Corporation's Intrinsic Stock Value

Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.

In this chapter, we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell Although estimating a stock's intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the Internet to find financial data in order to arrive at a quick "back-of-the- envelope" calculation of intrinsic value.

7. The required return on equity. rs is the final input needed to estimate intrinsic value For our purposes, urn can assume a number (say, 9% or 10%) or you can use the CAFM to calculate an estimate of the cost of equity, using the data available on the Internet. (For mow details, look at the Taking a Closer look exercise for Chapter 8.) Having decided on your best estimates for D1 rs and g, you can calculate XOM's intrinsic value. Be careful to make sure that the long-run growth rate is less than the required rate of return. How does this estimate compare with the current stock price? Does your preliminary analysis suggest that XDM is undervalued or overvalued? Explain.

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Chapter 9 Solutions

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