FIN – Determine the Value of Your Firm’s Equity

Part Three:Determine the Value of Your Firm’s Equity:1. We will use the Dividend­Discount Model to determine the firm’s equity – i.e., it willgive us the current price of a share of stock. We will use this model to estimate the valueof a share of your firm’s stock and compare this estimate to the current market value of this firm’s stock.2. Estimate the firm’s stock price using the Dividend­Discount Model:a.Use an investment source – e.g. , tofind the following information:Current dividendii. Analysts estimated growth rate for the next 5­10 yearsb. Use your estimate of the cost of equity in the WACC for the rE part of your formulac. Combine the above information into the Dividend­Discount Model3. Compare your result to the current market price of your firm’s stock. Describe, discuss,and analyze how they compare. Based on your knowledge of finance, how would youexplain any differences you observe?Notes:Whole Foods Market (WFM) is the firm to be used