Applying the Constant Growth ModelAssume that the market expected return is 12% and the risk-free rate is 3%. Each team needs to pick a stock and get the following information on it fromYahoo...

Applying the Constant Growth Model

Assume that the market expected return is 12% and the risk-free rate is 3%. Each team needs to pick a stock and get the following information on it fromYahoo Finance:

• Beta, next-5-years growth estimate




• In addition, you need to determine the required rate of return on the stock you are evaluating.


• Determine whether the constant growth is appropriate for valuing the stock.


• Calculate its value and compare to its market price.


• If your calculated price is significantly different from the market price, what adjustment to the growth rate or the required return do you recommend?


• Each team should upload one response regarding their assumptions on the evaluation parameters and their findings.