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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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It is often useful to perform a sensitivity analysis, where you show how your estimate of intrinsic value varies according to different estimates of D1, rs, and g. To do so, recalculate your intrinsic value estimate for a range of different estimates for each of these key inputs. One convenient way to do this is to set up a simple data table in Excel. Refer to the Excel tutorial accessed through the student companion website for instructions on data tables. On the basis of this analysis, what inputs justify the current stock price?

Summary Introduction

To calculate: The range of intrinsic values of shares of the company on the basis of different values of estimated dividend for next year, the rate of return on equity and growth rate and the inputs that will justify the current stock price.

Introduction:

Sensitivity Analysis:

It refers to the calculation of the values of a particular variable on the basis of different values of other variables on which the particular variable is dependent. In other words, in sensitivity analysis, the range of values of a particular variable is computed on the basis of different values of other variables or inputs.

Explanation

From the above table, it can be seen that while changing the dividend per sharefrom $3.213 to $3 the approximate current stock...

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