For each of the following scenarios, recalculate the intrinsic value of Chevron's shares using the three-stage growth model worked in the spreadsheet and the text. Treat each scenario independently. a) The terminal growth rate will be 5%. b) Chevron's actual beta is 1.0. c) The market risk premium is 6.5%.
For each of the following scenarios, recalculate the intrinsic value of Chevron's shares using the three-stage growth model worked in the spreadsheet and the text. Treat each scenario independently. a) The terminal growth rate will be 5%. b) Chevron's actual beta is 1.0. c) The market risk premium is 6.5%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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For each of the following scenarios, recalculate the intrinsic value of Chevron's shares using the three-stage growth model worked in the spreadsheet and the text. Treat each scenario independently.
- a) The terminal growth rate will be 5%.
- b) Chevron's actual beta is 1.0.
- c) The market risk premium is 6.5%.
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Ch 13 - Excel
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fr
NPV
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Inputs for Chevron
Year
dividend
div growth
term value
Investor CF PV
$4.40
$4.60
$4.80
$5.00
$5.28
$5.56
$5.85
$6.14
$6.44
$6.75
$7.06
$7.37
$7.69
$8.01
$8.33
$175.50
3
beta
1.15
2017
4.4
4.02
mkt prem
0.06
2018
4.6
3.84
rf
0.025
2019
4.8
3.67
6.
k_equity
0.094
2020
3.49
7
term growth
0.04
2021
5.28
0.055
3.37
2022
5.56
0.0535
3.24
9.
2023
5.85
0.052
3.12
10
Value Line dividend fcsts
2024
6.14
0.0505
2.99
11
2025
6.44
0.049
2.87
12
2026
6.75
0.0475
2.75
13
2027
7.06
0.046
2.63
14
Transition Period
2028
7.37
0.0445
2.51
15
w/ slowing div growth
2029
7.69
0.043
2.39
16
2030
8.01
0.0415
2.28
17
2031
8.33
0.04
2.16
18
2032
8.66
0.04
166.84
41.69
Beginning constant
div growth pd
19
20
$87.01
$87.01
21
NPV
NPV of each
using excel cash flow
added up
22
23
function
24
Chevron DDM
Tesla
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