Val Model

Intro
This file contains several illustrative valuation models.

Tabs:
2 & 3. A dividend discount model that calculates the stock's fair price and expected rate of return.
4. A 2-stage dividend discount model (with linear growth of dividends).
5. A 3-stage model with a linear 2nd period.
6. A 3-stage model with a smooth, curved transition during the 2nd period.
7. A variation of the Upside-Downside Ratio popularized by the National Association of Investment
Clubs. It measures the ratio of maximum likely appreciation in price to the maxium likely
fall in price.
Click on the tabs below and enter information into any cells which have blue text.
Only the DDM tab is required for the TVA Investment Challenge project. The other
tabbed spreadsheets are for illustration only.
Page 1
Intrinsic Value Model (P/E Ratio Approach)

Market Information
Risk-free Rate (T-bills)
6.0%
Market P/E Today
Beta
1.00
Market P/E in 3 Years
Expected Market Return
10.0%
Capital Asset Pricing Model
Required Rate of Return = 6.0% + 1.00 * (10.0% - 6.0%)
Required Rate of Return = 10.00%
Stock Information
Earnings Per Share (last yr.)
$1.20
Growth rate of earnings (next 3 years)
Payout Ratio (Div./Earnings)
30.0%
Co. P/E Ratio in 3 years
Current Stock Price
$48.00
Co. P/E Ratio at present
Summary
Fair Price Per Share
$53.28
Expected Rate of Return
Cash Flows
$80.00
$60.00
$40.00
$20.00
$0.00
($20.00)
($40.00)
($60.00)
0
Years
30.00
27.00
18.0%
35.000
40.000
13.9%
SCRATCHSHEET AREA
Earn(0) = $1.20 Earn(1) = 1.42 Earn(2) = 1.68 Earn(3) = 1.98

Div (0) = $0.36 Div (1) = 0.42 Div (2) = 0.42 Div (3) = 0.59
I.V. = 0.909 (0.42) + 0.826 (0.50) + 0.751 (0.59) + 0.751 (69.30)
I.V. = $53.28
not
P/E Ratio Now
40.0
Risk-free Rate =
Beta =
Market Rate of Return =
Expected Rate of Return =
6.0
1.00
10.0
13.9%
0
1
2
3
Req. Rate
10.0%
String Values for earnings, dividends, and PVFs

1.20
0.36
1.42
0.42
1.68
0.50
1.98
0.59
69.30
Last Year's Dividend
($48.00)
$0.42
$0.50
$69.89
0.909
0.826
0.751
$0.36
2 Stage Dividend
#REF!
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#REF!
#REF!
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#REF!
#REF!
#REF!
3 Stage Dividend
#REF!
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#REF!
#REF!
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#REF!
#REF!
#REF!
Earnings Projections (3-year forecast period)
E(0) =
E(1) =
E(2) =
E(3) =
1.20
1.42
1.68
x
x
x
1.18
1.18
1.18
$1.20
1.42
1.68
1.98
=
=
=
(growth rate of 18.0% per year)

Price/Earnings Ratios
Today
30.0
1.333
40.0
Market P/E
x Relative P/E
Company P/E
In 3 Years
27.0
x
1.296
35.0
(Definition of Relative P/E: The company's P/E ratio divided by the overall market's P/E ratio.)
INTRINSIC VALUE (P/E Approach)
CAPM:
Year
(
(
(
(
1
2
3
3
)
)
)
)
C.F.
($48.00)
$0.42
0.50
0.59
69.30
PVF
x
x
x
x
0.909
0.826
0.751
0.751
Fair Price
P/E(3)
35.00
x
x
E(3)
$1.98
=
=
Price(3)
$69.30
The fair price of the stock today is $53.28. At a current price of $48.00, you should
buy the stock. You should be willing to pay $48.00 for a stock that is worth $53.28.
NPV
=
=
=
=
$0.39
0.41
0.44
52.04
$53.28
Intrinsic Value Model For 4 Companies

Use Value Line's estimates if you like.
Company Name
Current Price
Beta
EPS - last 12 mos.
DPS - last 12 months
P/E in 4 years
EPS in 4 years
DPS in 4 years
Co. 1
$47.00
2.00
$1.35
$0.68
26.00
$2.50
$1.15
T-bill Rate
Co. 2
$20.00
1.00
$1.30
$0.73
19.00
$2.00
$1.00
2%
Required Return
(CAPM Value)
Growth Rates
Dividends (& Future Price)
Year 1
Year 2
Year 3
Year 4
12.0%
EPS
16.65%
Co. 3
$56.38
1.61
$3.27
$0.92
15.00
$5.15
$1.04
7.0%
DPS
14.04%
Co. 1
Dividends
Price
$
0.78
$
0.88
$
1.01
$
1.15 $ 65.00
EPS
11.37%
10.1%
DPS
8.19%
Co. 2
Dividends
Price
$
0.79
$
0.85
$
0.92
$
1.00 $ 38.00
EPS
12.02%
DPS
3.11%
Co. 3
Dividends
Price
$
0.95
$
0.98
$
1.01
$
1.04 $ 77.25
Earnings:
Year 1
Year 2
Year 3
Year 4
$
$
$
$
Present Value Factors:

1
2
3
4
Cash Flows:
Price
Dividend (Year 1)
Dividend (Year 2)
Dividend (Year 3)
Dividend + Price (Yr 4)
Fair Price:
Current Price:
Under- (or over)
valuation
1.57
1.84
2.14
2.50
$
$
$
$
1.45
1.61
1.80
2.00
$
$
$
$
3.66
4.10
4.60
5.15
0.8929
0.7972
0.7118
0.6355
0.9346
0.8734
0.8163
0.7629
0.9087
0.8257
0.7503
0.6818
$
$
$
$
Co. 1
($47.00)
0.78
0.88
1.01
66.15
$
$
$
$
Co. 2
($20.00)
0.79
0.85
0.92
39.00
Co. 3
($56.38)
$
0.95
$
0.98
$
1.01
$ 78.29
$
$
Co. 1
44.15
47.00
$
$
Co. 2
31.99
20.00
Co. 3
$ 55.80
$ 56.38
11.99
(2.85)
(0.58)
Co. 4
Expected Return
10.2%
20.9%
9.8%
Security Market Line

25.0%
Return (%)
20.0%
15.0%
10.0%
5.0%
0.0%
-
0.50
1.00
1.50
2.00
Beta
Graph Information:
Beta
0.50
1.00
1.50
2.00
2.50
2.00
1.00
1.61
1.20
SML
2.0%
4.5%
7.0%
9.5%
12.0%
14.5%
12.0%
7.0%
10.1%
8.0%
Exp. Return
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
10.2% Co. 1
20.9% Co. 2
9.8%
Co. 3
1.8%
Co. 4
2.50
Co. 4
$33.00
1.20
$1.50
$0.38
16.00
$2.10
$0.50
Market Return
7%
8.0%
EPS
8.78%
DPS
7.10%
Co. 4
Dividends
Price
$
0.41
$
0.44
$
0.47
$
0.50 $ 33.60
$
$
$
$
1.63
1.77
1.93
2.10
0.9259
0.8573
0.7938
0.735
Co. 4
($33.00)
$
0.41
$
0.44
$
0.47
$ 34.10
Co. 4
$ 26.18
$ 33.00
$
(6.82)
1.8%
Security Market Line

Expected Returns
3.00
2-Stage Dividend Discount Model

Market Information
6.0%
Beta
1.00
Stock Information
Dividends Per Share (last yr.)
$0.21
Growth rate for 1st stage of growth
Current Stock Price
$35.00
Growth rate for 2nd stage of growth
# of years in 1st stage of growth
Summary
$30.43
Pattern of Dividend Growth
Log of Dividends
10.00
1.00
1
11
16
0.10
Years
21
26
SCRATCHSHEET AREA
Risk-free Rate =
Beta =
6.0
1.00
10.0
Req. Rate
10.0%
10.0%
18.0%
8.0%
12
8.7%
Year
0
Growth
Rate
N/A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
Dividends
0.21
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.65
1.79
1.93
2.08
2.25
2.43
2.62
2.83
3.06
3.30
3.57
3.85
4.16
4.50
4.85
5.24
5.66
6.12
6.60
7.13
7.70
8.32
8.99
9.70
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Price
82.64
-
Total
Cash Flow
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($35.00)
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
84.17
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PVF
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
0.350
0.319
-
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37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
10.48
11.32
12.22
13.20
14.26
15.40
16.63
17.96
19.40
20.95
22.63
24.44
26.39
28.50
30.78
33.25
35.91
38.78
41.88
45.23
48.85
52.76
56.98
61.54
66.46
71.78
77.52
83.72
90.42
97.65
105.47
113.90
123.01
132.86
143.48
154.96
167.36
180.75
195.21
210.83
227.69
245.91
265.58
286.83
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*
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*
=
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81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
309.77
334.55
361.32
390.22
421.44
455.16
491.57
530.90
573.37
619.24
668.78
722.28
780.06
842.46
909.86
982.65
1,061.26
1,146.16
1,237.86
1,336.88
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Present
Value
Total
Value
$0.23
0.24
0.26
0.28
0.30
0.32
0.34
0.37
0.40
0.42
0.45
26.82
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
$30.43
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Market Information
5.0%
Beta
1.00
Dividend and Stock Information
$0.21
Current Stock Price
$35.00
Growth rate for 2nd stage of growth
Growth rate for 3rd stage of growth
# of years in 2nd stage of growth
Summary
$36.47
Pattern of Dividend Growth
Log of Dividends
10.00
1.00
1
11
16
0.10
Years
21
26
SCRATCHSHEET AREA
Risk-free Rate =
Beta =
5.0
1.00
10.0
Req. Rate
10.0%
10.0%
18.0%
11.0%
8.0%
12
8
10.2%
Year
0
Growth
Rate
N/A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
Dividends
0.21
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.70
1.89
2.09
2.32
2.58
2.86
3.18
3.53
3.81
4.11
4.44
4.80
5.18
5.60
6.04
6.53
7.05
7.61
8.22
8.88
9.59
10.36
11.19
12.08
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Price
190.45
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Total
Cash Flow
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($35.00)
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.70
1.89
2.09
2.32
2.58
2.86
3.18
193.98
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PVF
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
0.350
0.319
0.290
0.263
0.239
0.218
0.198
0.180
0.164
0.149
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37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
13.05
14.09
15.22
16.44
17.75
19.17
20.71
22.36
24.15
26.09
28.17
30.43
32.86
35.49
38.33
41.39
44.71
48.28
52.15
56.32
60.82
65.69
70.94
76.62
82.75
89.37
96.52
104.24
112.58
121.58
131.31
141.82
153.16
165.42
178.65
192.94
208.38
225.05
243.05
262.49
283.49
306.17
330.67
357.12
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
385.69
416.54
449.87
485.86
524.72
566.70
612.04
661.00
713.88
770.99
832.67
899.29
971.23
1,048.93
1,132.84
1,223.47
1,321.35
1,427.05
1,541.22
1,664.51
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Present
Value
Total
Value
$0.23
0.24
0.26
0.28
0.30
0.32
0.34
0.37
0.40
0.42
0.45
0.49
0.49
0.50
0.50
0.51
0.51
0.51
0.52
28.83
-
$36.47
3-Stage Transition Model

Market Information
5.0%
Beta
10.0%
Stock Information
Earnings Per Share (last yr.)
$0.84
$0.21
Growth rate for 3rd stage of growth
Payout Ratio (Div./Earnings)
25.0%
Current Stock Price
$35.00
Last stage begins in year number ____
$32.63
1.00
Growth Pattern of Dividends
Log of Dividends
$100.00
$10.00
$1.00
1
11
21
31
Years
$0.10
41
SCRATCHSHEET AREA
Risk-free Rate =
Beta =
5.0
1.00
10.0
Required Rate of Return =
0.1
Growth
Rate
18.0%
8.0%
12
20
9.8%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
16.8%
15.5%
14.3%
13.0%
11.8%
10.5%
9.3%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
Year
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Earnings
0.99
1.17
1.38
1.63
1.92
2.27
2.68
3.16
3.73
4.40
5.19
6.12
7.15
8.25
9.43
10.66
11.91
13.16
14.38
15.53
16.77
18.11
19.56
21.12
22.81
24.64
26.61
28.74
31.04
33.52
36.20
39.10
42.23
45.61
49.25
53.20
57.45
Dividend
-35.00
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.79
2.06
2.36
2.66
2.98
3.29
3.59
3.88
4.19
4.53
4.89
5.28
5.70
6.16
6.65
7.18
7.76
8.38
9.05
9.78
10.56
11.40
12.31
13.30
14.36
PVF
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
0.350
0.319
0.290
0.263
0.239
0.218
0.198
0.180
0.164
0.149
0.135
0.123
0.112
0.102
0.092
0.084
0.076
0.069
0.063
0.057
0.052
0.047
0.043
0.039
0.036
0.032
0.029
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
62.05
67.01
72.37
78.16
84.41
91.17
98.46
106.34
114.84
124.03
133.95
144.67
156.24
168.74
182.24
196.82
212.57
229.57
247.94
267.78
289.20
312.33
337.32
364.31
393.45
424.93
458.92
495.63
535.28
578.11
624.36
674.30
728.25
786.51
849.43
917.38
990.77
1,070.04
1,155.64
1,248.09
1,347.94
1,455.77
1,572.23
1,698.01
15.51
16.75
18.09
19.54
21.10
22.79
24.62
26.58
28.71
31.01
33.49
36.17
39.06
42.19
45.56
49.21
53.14
57.39
61.99
66.94
72.30
78.08
84.33
91.08
98.36
106.23
114.73
123.91
133.82
144.53
156.09
168.58
182.06
196.63
212.36
229.35
247.69
267.51
288.91
312.02
336.98
363.94
393.06
424.50
0.027
0.024
0.022
0.020
0.018
0.017
0.015
0.014
0.012
0.011
0.010
0.009
0.009
0.008
0.007
0.006
0.006
0.005
0.005
0.004
0.004
0.004
0.003
0.003
0.003
0.002
0.002
0.002
0.002
0.002
0.002
0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.000
0.000
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
1,833.85
1,980.56
2,139.01
2,310.13
2,494.94
2,694.53
2,910.10
3,142.90
3,394.34
3,665.88
3,959.15
4,275.89
4,617.96
4,987.39
5,386.38
5,817.29
6,282.68
6,785.29
7,328.12
458.46
495.14
534.75
577.53
623.73
673.63
727.52
785.73
848.58
916.47
989.79
1,068.97
1,154.49
1,246.85
1,346.60
1,454.32
1,570.67
1,696.32
1,832.03
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Scratchsheet Area
Total
Present
Value
0.23
0.24
0.26
0.28
0.30
0.32
0.34
0.37
0.40
0.42
0.45
0.49
0.52
0.54
0.56
0.58
0.59
0.59
0.59
0.58
0.57
0.56
0.55
0.54
0.53
0.52
0.51
0.50
0.49
0.48
0.47
0.46
0.45
0.45
0.44
0.43
0.42
Transition rate =
1.25%
Data for the graph

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.79
2.06
2.36
2.66
2.98
3.29
3.59
3.88
4.19
4.53
4.89
5.28
5.70
6.16
6.65
7.18
7.76
8.38
9.05
9.78
10.56
11.40
12.31
13.30
14.36
-35.00
0.25
0.29
0.35
0.41
0.48
0.57
0.67
0.79
0.93
1.10
1.30
1.53
1.79
2.06
2.36
2.66
2.98
3.29
3.59
3.88
4.19
4.53
4.89
5.28
5.70
6.16
6.65
7.18
7.76
8.38
9.05
9.78
10.56
11.40
12.31
13.30
14.36
0.41
0.41
0.40
0.39
0.39
0.38
0.37
0.36
0.36
0.35
0.35
0.34
0.33
0.33
0.32
0.31
0.31
0.30
0.30
0.29
0.29
0.28
0.28
0.27
0.27
0.26
0.26
0.25
0.25
0.24
0.24
0.23
0.23
0.23
0.22
0.22
0.21
0.21
0.21
0.20
0.20
0.20
0.19
0.19
38
39
40
41
42
43
44
45
46
47
48
49
50
$
$
$
$
$
$
$
$
$
$
$
$
$
15.51
16.75
18.09
19.54
21.10
22.79
24.62
26.58
28.71
31.01
33.49
36.17
39.06
15.51
16.75
18.09
19.54
21.10
22.79
24.62
26.58
28.71
31.01
33.49
36.17
39.06
0.18
0.18
0.18
0.18
0.17
0.17
0.17
0.16
0.16
0.16
0.15
0.15
0.15
0.15
0.14
0.14
0.14
0.14
0.13
32.63
Up-Down
Upside-Downside Ratio:
An attempt to measure the maximum potential return and the maximum possible loss.
Upside Potential
Highest probable P/E
during the next four years
Highest Probable EPS
Downside Potential
Lowest Probable P/E
Co. 1
Co. 2
Co. 3
Co. 4
44.0
19.0
17.0
22.0
$1.60
$2.00
$2.00
$2.10
24.0
15.0
13.0
15.0
Lowest Probable EPS

1.10
Highest probable price

Current price
Lowest probable price
$ 70.40
$ 47.00
$ 26.40
$ 38.00
$ 20.00
$ 18.00
$ 34.00
$ 56.38
$ 18.20
$ 46.20
$ 33.00
$ 21.00
Upside Potential
Downside Potential
$ 23.40
$ 20.60
$ 18.00
$
2.00
$ (22.38)
$ 38.18
$ 13.20
$ 12.00
Upside/Downside Ratio
1.14
9.00
(0.59)
1.10
Upside Percentage Return

Downside Percentage Return
50%
44%
90%
10%
-40%
68%
40%
36%
Page 45
1.20
1.40
1.40

Val Model

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Val Model

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Intro

This file contains several illustrative valuation models.

Intrinsic Value Model (P/E Ratio Approach)

Earn(0) = $1.20 Earn(1) = 1.42 Earn(2) = 1.68 Earn(3) = 1.98

String Values for earnings, dividends, and PVFs

Earnings Projections (3-year forecast period)

(growth rate of 18.0% per year)

INTRINSIC VALUE (P/E Approach)

Intrinsic Value Model For 4 Companies

Expected Market Return

Present Value Factors:

Security Market Line

Security Market Line

2-Stage Dividend Discount Model

Pattern of Dividend Growth

2-Stage Dividend Discount Model

3-Stage Dividend Discount Model

Pattern of Dividend Growth

3-Stage Dividend Discount Model

3-Stage Transition Model

Growth Pattern of Dividends

Required Rate of Return =

Data for the graph

Lowest Probable EPS

Highest probable price

Upside Percentage Return

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