Starbucks corporation SBuxd AF301 Stock Valuation Practice2

Starbucks corporation (SBux)d AF301 Stock Valuation Practice2 58.16 +0.16 (+0.28%) ? Add to watch NasdaqGS-Nasda GS Real Time Price Currency in USO The required return on this stock is 6.5% Given the data in the table, what is the fair value of Starbuck\'s stock? Buy At close: Apnl 23 4:00PM ED Click here to start Summary Chat Conversations 58.00 Market Cap Previous Cose Open Bid Ask Day\'s Range 52 Week Range 52.58-64 87 81.758 0.52 57.15: 100PE Rusi2 What is the HPR of the stock? 59.17 x 100 EPS (TTM) 3.02 7.70-58 73 Earnings Date Apr 26, 2018 Forward Dividend 1.20 (203%) 10 Would you buy the stock? Volume 7,404,857 Avg Volume 0,942,537 y Target Es 3.82 4. You are considering a stock that is expected to pay a dividend of $2 next and $3 the following year. You think that you could sell it for $45 at that time. If the required return is 12%, how much should you be willing to pay for the stock? 5. A stock just paid a dividend of $2 and is expected to grow The required return is dividends at 4% every year forever 7.5%. a. What is the stock\'s value? b. What is the stock\'s dividend yield? c. What is the stock\'s capital gain\'s yield? d. What is the stock\'s expected price in 7 years?

Solution

4.

value = 40.05

5. stock value = 2*1.04/(0.075-0.04) = 59.42

b. dividend yield = 7.5% - 4% = 3.5%

c. capital gains yield = 4%

d. price in 7 years = 59.42* 1.04^7 = 78.20

Discount rate	12.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
2.000	1	1.79	1.79
3.000	2	2.39	4.18
45.000	2	35.87	40.05