Trading Case:
EV2
The quick and dirty on EV2
New symbol?
What's notable about the stock?
BOXX
same idea as EV1, except earnings grow
required rate depends of risk-free:
\[r=r_f+11\%\]
growth in dividends:
\[g=\frac{\text{this year's dividends}}{\text{last year's dividends}}-1\]
payout rate is \(60\%\)
What do you have to do?
same as EV1: build an EXCEL model for the fundamental value and follow updates
Background on Theory
With growing dividends, the Gordon Growth model applies:
\[P=\frac{EPS}{r-g}\cdot \text{\% payout}.\]
Where does \(r\) come from? \(\to\) CAPM!
\[r_i=r_f+\beta(r_m-r_f)\]
Here:
\[\beta(r_m-r_f)=11\%\]
You need to determine \(r,g,\) expected \(EPS\)