DDM And PE Valuation Methods in The Quantitative Portion Essay
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages
DDM And PE Valuation Methods in The Quantitative Portion Essay
The goal of this project is to estimate the value loss or creation resulting from COVID-19 for a firm of
you can dismiss the DDM and PE valuation methods in the Quantitative portion.
I strongly suggest that you start working on this project as early as possible.
Qualitative Research (Before COVID-19 crisis):
You should include a qualitative analysis where you describe:
o The overall situation of the firm and trajectory
o The financial situation of the firm
o The prospects for growth and future plans
Please include a brief SWOT Analysis
Detail the reasons supporting your chosen “super-normal growth rate”. You should also justify
your chosen time-horizon of this “super-normal growth” stage of the business cycle of the
firm (how long the firm will grow at this super normal rate before using the long term growth
The qualitative analysis must be at least 2 pages (single-spaced and typed). In addition to the
2 pages, you should explain the rationale behind your choice for all needed assumptions in
Quantitative Research (Before vs. After COVID-19 crisis):
A: Estimate the value of your firm using three valuation methods (DDM, PE and DCF) before
the COVID-19 shock (As of January 2020).
B: Estimate the value of your firm using three valuation methods (DDM, PE and DCF) after the
COVID-19 shock (As of April 2020). (Hint for DDM: Has the firm announced any changes to the
***Before choosing a firm, please make sure that the company is profitable (is having positive
earnings) and that it has paid dividends for at least three years.
***If you are working on the project by yourself, you can dismiss the DDM and PE valuation
The value loss or creation is simply the difference between A and B for each model. Please
answer the question: In your opinion, which valuation method captured the value loss/gain
more precisely and why do you think this is the case?
You should submit your quantitative research in an Excel Workbook. All calculations should
be made by formulas. Any number plugged-in manually will be ignored for grading purposes.
Your assumptions, of course, are the result of your qualitative research. Although these values
may be plugged directly (there is no formula), you should describe how you chose the “x” or
“y” value as your assumption in the qualitative portion.
For calculation of Beta, your historical observation period will be 2017 – 2019 (3-Year Period).
Use monthly returns.
Remember that the discount rate used in the DDM method is the Expected Return estimated
from the Capital Asset Pricing Model.
It is understood that an accurate estimation of a firm’s value loss or gain due to COVID-19 is
a laborious and complex process which requires data that is not in your reach or possibly not
yet available. Attempting to do so is out of the reach of this project. Notwithstanding, you
should be ok implementing the basic form of DDM, PE and DCF models as learned in this class.
If you face any challenges or limitations, please reach out to your instructor.
You will not be graded by the accuracy of your valuation, data, inputs or output, but rather by
correctly implementing the models learned in class.
* You must show your calculations for Beta. Remember to use 36 months. You can vary this timeframe
providing the reasons to do so.
* In this project, you should consider the 10-year Treasury rate as the “risk-free” rate. You can find
this rate at: https://fred.stlouisfed.org/series/DGS10. The risk-free rate will be quite different before
and after COVID-19 ….. Just as food for thought: Pay attention to the effect of this rate in your cost of
equity and cost of capital.
* Assume S&P500 returns as the “market returns”. You can get the index prices from Yahoo Finance
(https://finance.yahoo.com/quote/%5EGSPC/history/). Remember to use the Adjusted Close column.
Please keep in mind these are the prices. For your valuation, you will need the returns (Pt+1 / Pt – 1).
* When calculating your firm’s WACC (In the Discounted Cash Flow Model), you do not need to
calculate the cost of debt. You can find it online and cite your source.
* Please indicate your sources for all data used in your valuation.
* You may find data for Quarterly Dividends. However, please remember to use the total yearly Dividends when estimating the stock value using DDM (Dividend Discount Model).
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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