Given that Dr. Washington warns to make stocks a major part of his investment po

Question

Given that Dr. Washington warns to make stocks a major part of his investment portfolio, you decide to focus on how to analyze stocks. You decide to use a large U.S. industrial company to demonstrate how to analyze stocks. The research department has provided you with the following information regarding this company. This year (2009), free cash flow is expected to reach $325 million. In 2010, it is expected to reach $350 million 2011, $400 million 2012, $425 million And 2013, $450 million The analyst has projected an intrinsic value for this stock of $65.00 Dr. Washington is busy this week, so he asks you to send him an e-mail Compose an e-mail that in addition to explaining the following information for the industrial company, which is a publicly traded company that trades on the NYSE, addresses the efficient market hypothesis, and how the analyst responsible for monitoring this stock has projected this intrinsic value for the companys stock 52-week range: Hi 75 Lo 35 Current stock price: 50 Dividend yield: 2 75% Dividend per share: 1.375 P/E ratio: 20 Earnings per share: $2 50 Shares outstanding: 100 million Market capitalization: $5 billion Cost of capital: 9% Growth rate of free-cash-flows beyond 2013: 3% In your own words rewrite the definition for each of the ten values Demonstrate how to calculate the values using the information from the company's stock as an example Next answer the following questions What is the efficient market hypothesis and what is its relationship to stock valuation? What is the free-cash-flow approach to valuing stocks? Using the free-cash-flow approach, how did the analyst arrive at an intrinsic stock value of $65 for the company?

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