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Bus 405 week 2 assignment abbott laboratories problem
1. BUS 405 Week 2 Assignment Abbott Laboratories Problem
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laboratories-problem
Week 2 – Assignment - Abbott Laboratories Problem
After reading the Value Line figures and information on Abbott Laboratories in
the Questions and Problems section of Chapter 6 (just before Problem 27),
complete Problems 27, 28, 29, 30, and 31 and submit to your instructor. Show
your calculations and in your response to problem 31 write a 100 to 200 word
defense of your position as to the value of Abbott Laboratories stock at its
current price of $50 per share.
27. What is the sustainable growth rate and required return for Abbott
Laboratories? Using these values, calculate the 2010 share price of Abbott
Laboratories Industries stock according to the constant dividend growth model.
28. Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price for
Abbott Laboratories. Use the average stock price each year to calculate the
price ratios.
29. Assume the sustainable growth rate and required return you calculated in
Problem 27 are valid. Use the clean surplus relationship to calculate the share
price for Abbott Laboratories with the residual income model.
30. Use the information from the previous problem and calculate the stock price
with the clean surplus dividend. Do you get the same stock price as in the
previous problem? Why or why not?
31. Given your answers in the previous questions, do you feel Abbott
Laboratories is overvalued or undervalued at its current price of around $50? At
what price do you feel the stock should sell?
