This assignment may be completed using either Nordstrom or Sinclair Broadcasting.
Tasks
· Estimate the weighted average cost of capital for the company.
· Develop an assumption regarding an appropriate horizon growth rate
· Use your WACC and horizon growth rate assumptions, along with a set of assumed forecasting parameters, to calculate the price per share for the company.
· Show how the price per share will vary for at least two changes in your key forecasting parameters.
Submission
Write a 2-3 page memo that covers the following:
· Explanation of how the basic elements of the company business strategy and general industry and economic conditions relate to your development of key forecasting parameters. Include a sentence or two regarding your opinion as to whether the company can sustain a return to investors using its current business strategy.
· Brief description of your method and findings in regard to your WACC and horizon growth rate estimates.
· Comparison of your price per share estimate to the actual price per share at the time of the valuation (e.g., end of Jan 2017 for Nordstrom, end of Dec 2016 for Sinclair).
· Explanation of the degree to which the price estimate is sensitive to changes in key parameter values.
· Recommendation to an investor as to whether the stock is priced efficiently.