This document provides a stock valuation of General Electric Company using several models. It first discusses GE's industry and company overview, strengths, and weaknesses. It then estimates the intrinsic value of GE's stock using the constant growth dividend model, residual income model, and market multiples approaches. The constant growth dividend model estimates a value lower than the current stock price, suggesting the stock is overvalued and recommending a short position.
Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the industries that make that economy tick - that you won’t find in the general press coverage of events.
Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies.
In this issue…
…we feature the following markets:
The Netherlands – with a spotlight on construction and transport industry sectors
Spain – with a spotlight on construction and automotive industry sectors
United States of America
Belgium
Austria
Ireland
Poland
Indonesia
The Icelandic financial crisis from 2007-2011 was one of the largest banking collapses in history relative to the country's size. Iceland's three major privately owned banks grew to over 10 times the size of Iceland's GDP through risky lending practices. When the global financial crisis hit in 2008 and Iceland's currency depreciated severely, the banks collapsed and had to be nationalized. Iceland was able to recover through loans from other Nordic countries and an IMF program, and has since experienced strong economic growth. However, the crisis was caused by a perfect storm of factors, including a volatile inflation rate, risky foreign borrowing by the banks, and conflicts of interest between the banks' owners and managers.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Activity Comparing Industry Trends In Pay Rates Such As It, Fmcgsimply_coool
This document discusses strategies for compensating employees during economic uncertainty. It provides context on the current economic recession in the US and rising unemployment. It then discusses measuring total compensation costs, including salaries, bonuses, benefits like health insurance and retirement plans. Finally, it discusses some short-term responses companies have taken during the recession like layoffs, hiring freezes, and reduced salaries. But it argues that long-term strategies beyond just cost-cutting are needed to sustain employee talent through different types of tailored compensation.
A2 & AS Economics: UK Economy Revision Briefingtutor2u
The UK economy suffered a deep recession from 2008-2009 and recovery has been slow and fragile with growth below 1% in most years since. Weak private sector demand from falling real incomes and low business investment have held back growth. Export growth has also slowed in recent years. The government has pursued fiscal austerity measures and spending cuts to reduce large budget deficits, further weighing on growth. Restoring stronger growth and rebalancing the economy away from debt-fuelled consumption toward exports and investment will require boosting productivity, business investment, and improving the supply of credit. Potential growth rates are estimated to have declined significantly in recent years due to factors like low R&D spending and business investment.
The United States has the largest and most technologically advanced economy in the world. Private businesses and individuals make most economic decisions, while the government provides stimulus when needed. While US firms are global leaders in many industries, income inequality has increased and long-term problems include stagnating wages, aging infrastructure, and large budget and trade deficits.
The document contains several articles on topics related to globalization such as its impact on various economies, industries and markets. One article discusses the Indonesian government taking emergency measures to address the economic recession's effects. Another examines globalization's impact on China's economic growth. A third discusses accounting standards and their adoption. Overall the document covers how globalization and the global economic situation affect many different areas worldwide.
Today’s Economic Landscape and What’s on the Other SideSavannah Whaley
SPG Trend Advisors is a boutique consultancy that provides global economic research for business and other decision makers. With fifty years combined experience between the principals, and through its website, SPG Trend Advisors provides insightful analysis and forecasting to prepare senior executives for tomorrows trends.
Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the industries that make that economy tick - that you won’t find in the general press coverage of events.
Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies.
In this issue…
…we feature the following markets:
The Netherlands – with a spotlight on construction and transport industry sectors
Spain – with a spotlight on construction and automotive industry sectors
United States of America
Belgium
Austria
Ireland
Poland
Indonesia
The Icelandic financial crisis from 2007-2011 was one of the largest banking collapses in history relative to the country's size. Iceland's three major privately owned banks grew to over 10 times the size of Iceland's GDP through risky lending practices. When the global financial crisis hit in 2008 and Iceland's currency depreciated severely, the banks collapsed and had to be nationalized. Iceland was able to recover through loans from other Nordic countries and an IMF program, and has since experienced strong economic growth. However, the crisis was caused by a perfect storm of factors, including a volatile inflation rate, risky foreign borrowing by the banks, and conflicts of interest between the banks' owners and managers.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Activity Comparing Industry Trends In Pay Rates Such As It, Fmcgsimply_coool
This document discusses strategies for compensating employees during economic uncertainty. It provides context on the current economic recession in the US and rising unemployment. It then discusses measuring total compensation costs, including salaries, bonuses, benefits like health insurance and retirement plans. Finally, it discusses some short-term responses companies have taken during the recession like layoffs, hiring freezes, and reduced salaries. But it argues that long-term strategies beyond just cost-cutting are needed to sustain employee talent through different types of tailored compensation.
A2 & AS Economics: UK Economy Revision Briefingtutor2u
The UK economy suffered a deep recession from 2008-2009 and recovery has been slow and fragile with growth below 1% in most years since. Weak private sector demand from falling real incomes and low business investment have held back growth. Export growth has also slowed in recent years. The government has pursued fiscal austerity measures and spending cuts to reduce large budget deficits, further weighing on growth. Restoring stronger growth and rebalancing the economy away from debt-fuelled consumption toward exports and investment will require boosting productivity, business investment, and improving the supply of credit. Potential growth rates are estimated to have declined significantly in recent years due to factors like low R&D spending and business investment.
The United States has the largest and most technologically advanced economy in the world. Private businesses and individuals make most economic decisions, while the government provides stimulus when needed. While US firms are global leaders in many industries, income inequality has increased and long-term problems include stagnating wages, aging infrastructure, and large budget and trade deficits.
The document contains several articles on topics related to globalization such as its impact on various economies, industries and markets. One article discusses the Indonesian government taking emergency measures to address the economic recession's effects. Another examines globalization's impact on China's economic growth. A third discusses accounting standards and their adoption. Overall the document covers how globalization and the global economic situation affect many different areas worldwide.
Today’s Economic Landscape and What’s on the Other SideSavannah Whaley
SPG Trend Advisors is a boutique consultancy that provides global economic research for business and other decision makers. With fifty years combined experience between the principals, and through its website, SPG Trend Advisors provides insightful analysis and forecasting to prepare senior executives for tomorrows trends.
This weekly financial digest from BMO Nesbitt Burns provides an economic overview and outlook. It discusses recent economic data from Canada, the US, Europe and Asia. It also analyzes the potential economic impacts of the US presidential election and whether the outcome matters for financial markets. Global bond and equity market returns are provided. The document concludes with BMO Nesbitt Burns' economic and market outlook forecasts.
The state of the us economy marco annunziata ge market sense 1 nov12neiracar
The US economy continues to show resilience despite uncertainty from the upcoming fiscal cliff. Private consumption has strengthened due to improvements in the housing market and labor market. However, business investment and hiring remain constrained by policy uncertainty, particularly regarding how the large budget deficit will be addressed in the long run. If major fiscal policy issues can be resolved decisively in 2013, businesses may increase spending and hiring to boost economic growth. But continued uncertainty risks prolonging the current sluggish recovery.
- Global inflation has been trending downward since 2011 due to factors like technological innovation lowering prices and free trade increasing competition. However, the UK's inflation rate rose in 2016 as the falling pound since the Brexit vote began transmitting higher import prices to consumers.
- While UK inflation is projected to rise to around 2.5-2.75% by 2018-2019 as the pound's depreciation fully feeds through the economy, bond markets expect even higher inflation of 3.1%. Rising inflation could squeeze corporate profit margins and erode bond values as interest rates rise.
- Equity performance in a rising inflation environment depends on the stage of the economic cycle. Moderate inflation and interest rate hikes during growth periods are
Great lessons to be learned from Japan’s balance sheet recessionSwedbank
The document summarizes Japan's economic situation and outlook following the global recession. It finds that Japan has been hit harder than other countries due to its export-focused manufacturing sector and a strengthening yen. While the worst decline appears to be over as exports and production stabilize, the recovery will be fragile with continued overcapacity, weak demand, and dependence on growth in other countries like the US and China. The growth forecast estimates a 6.5% GDP decline in 2009 and a modest 1% growth in 2010, with adjustments and global imbalances slowing a sustained rebound. Lessons from Japan's experience with balance sheet recessions and asset bubbles are also relevant for other countries facing similar challenges.
1. The economic cycle refers to short-run fluctuations in national output (real GDP) around its long-term trend. It includes periods of boom, slowdown, recession, and recovery.
2. A recession is defined as at least six months of falling output across the economy. It can cause rising unemployment, falling business profits, and declining tax revenues.
3. Estimating the output gap, which is the difference between actual GDP and potential GDP, is difficult but important for understanding inflationary pressures and spare capacity in the economy. A negative output gap indicates unused resources while a positive gap risks inflation.
The document discusses factors that may have caused a decrease in the UK's international competitiveness between 2007-2008. These include: low investment and R&D spending, which hindered market growth and improvement; outdated infrastructure, especially for transportation, which impacted industry efficiency; and a shortage of skilled workers, lowering production quality. It also notes the global recession in 2008 reduced consumer spending and demand for services. Strategies to improve competitiveness mentioned include: increasing training to develop specialized skills; lowering business taxes; government incentives for investment; and subsidies to support growth industries. However, some strategies like trade barriers could spark retaliation, while tax cuts may not lower costs.
Latvia implemented an internal devaluation strategy in response to the global financial crisis rather than using exchange rate devaluation. This involved pro-cyclical fiscal policies like tax increases and government spending cuts to reduce wages and prices. While Latvia's GDP has grown since 2010, some economists are skeptical this can be sustained due to weak private investment and consumption from high debt levels. Latvia's economic growth remains heavily reliant on net trade exports.
The document discusses Brazil's economy between 2002 and 2011 based on two figures and an extract.
Figure 1 shows Brazil's GDP per capita increased from $7,800 to $11,700 over this period. Figure 2 shows Brazil's population grew from 176m to 203m. Therefore, Brazil's total GDP increased approximately 53% from $1.78 trillion to $2.73 trillion.
The extract mentions Brazil's currency, the Real, appreciated nearly 40% against other currencies since 2008. This was due to high interest rates attracting speculative capital inflows and increased exports of commodities like soybeans contributing to a current account surplus.
An appreciation could improve Brazil's current account balance in the short-
The document summarizes the Ma Foi Randstad Employment Trends Survey (MEtS) for the fourth quarter of 2011 and projected trends for the first quarter of 2012. The survey polled 639 companies across 13 sectors to assess employment trends in the organized sector. Key findings included expected increases in employment in sectors such as financial services, IT, and healthcare, while manufacturing saw more muted growth. The report analyzed trends by sector, salary increases, new hire experience and functions.
Reflecting a positive hiring outlook, the organized sector in India is expected to create about 1.6 million new jobs in the year 2012, as per the latest results of a survey from HR firm Ma Foi Randstad..
The document analyzes Sri Lanka's potential to achieve higher economic growth targets. It finds that Sri Lanka is well positioned due to recent macroeconomic gains like low inflation and unemployment. However, pursuing 9% growth would require overcoming challenges like a high budget deficit, "brain drain", and infrastructure deficits. The document recommends policies like privatization, fiscal reforms, and investing in education, infrastructure, and sustainable "green growth" to boost productivity and feasibility of higher targets while mitigating potential negative impacts on inequality and the environment.
http://pwc.to/1h2k2l4
Après cinq années de crise, de récession et de croissance décevante, nous pensons que les pays développés peuvent maintenant approcher de la "vitesse de libération" nécessaire pour une reprise durable.
Export nations need to ensure that supply chains remain as intact as possible. This means that when and where credit insurers are withdrawing from covering international trade during this crisis, the government exceptionally steps in. Otherwise there is a risk a collapse of finely woven supply chains.”
OCR F85 Global Economy June 2016 Key Definitionstutor2u
This resource brings together many of the key definitions for the June 2016 OCR F585 Global Economy paper. There are many more resources for this exam available from the Tutor2u website www.tutor2u.net/economics
The document summarizes the outlook and strategy of the Global Commodity Systematic Program (GCS) managed by Global Advisors. GCS uses a rules-based, non-discretionary approach to identify and manage trends across 35 commodity markets. It expects profitable opportunities over the next few years due to factors such as the devaluation of paper currencies, continued demand growth in emerging markets like China, a supply shock from reduced commodity investment, and increasing investment in commodities from stock market investors. Charts are presented supporting these views, and it is argued that if commodity markets exhibit strong trends, the GCS program will be able to generate strong returns managing those trends.
The document discusses expectations for key sectors in India's upcoming Union Budget for 2011-2012. It is expected that the budget will focus on increasing investments in agriculture and infrastructure to address issues like higher inflation, lower industrial growth, and lack of infrastructure investments. Specifically, the budget may increase funding for agriculture, irrigation, research and development, and infrastructure projects. It also discusses expectations for other sectors like power, metals, mining, oil and gas, cement, and automobiles. The overall aim of the budget is seen as accelerating GDP growth through these sectors while maintaining fiscal deficit targets.
China has the second largest economy globally and is projected to surpass the US by 2020. It has experienced strong and consistent GDP growth for decades, averaging around 7-9% annually, though growth has slowed recently. China has a one-party communist government and is transitioning its economy from manufacturing and exports to more domestic consumption and innovation. It faces challenges from a slowing housing market and global economic uncertainties.
State of the construction industry (2006 2007)Lisa Dehner
The construction industry surpassed $1 trillion for the third consecutive year in 2006, although growth slowed due to the residential sector. While residential construction grew by an average of $80 billion per year from 2002 to 2005, it only grew by less than $1 billion in 2006 and has declined $47 billion through May 2007. However, the industry overall remains in growth due to strength in non-residential sectors such as public construction. The US economy is substantially impacted by the slowing residential market, which influences retail markets. The construction industry is a major component of the US economy, so its growth moves with GDP.
Enersys Case Study - MBA Strategic Mgmt ClassSam Bishop
This document provides a strategic analysis of Enersys, Inc., a major industrial battery manufacturer. It discusses the company's internal strengths such as its strong financial position and global production capacity, as well as weaknesses like overreliance on lead-acid batteries. External opportunities include new technologies and partnerships, while threats include new entrants and rising material costs. The document analyzes the industry, Enersys' products and markets, and provides recommendations to transform and incrementally improve the company's strategy.
Intel Corporation (“Intel”) designs and manufactures
advanced integrated digital technology platforms that power
an increasingly connected world. A platform consists of
a microprocessor and chipset, and may be enhanced by
additional hardware, software, and services. The platforms
are used in a wide range of applications, such as PCs, laptops,
servers, tablets, smartphones, automobiles, automated
factory systems, and medical devices. Intel is also in the midst
of a corporate transformation that has seen its data-centric
businesses capture an increasing share of its revenue.
This report provides economic impact estimates for Intel in terms of employment, labor income, and gross domestic product (“GDP”) for the most recent historical year, 2019.1
After reading about the history of welfare in the USA, describe in y.pdfarihantmobilepoint15
After reading about the history of welfare in the USA, describe in your own words how our
current welfare system came to be. What are your thoughts about Sweden\'s welfare system?
How would creating a similar system in the USA impact the field of human services? Why does
the USA not have a welfare system similar to Sweden?
Solution
The US has the largest and most technologically powerful economy in the world, with a per
capita GDP of $49,800. In this market-oriented economy, private individuals and business firms
make most of the decisions, and the federal and state governments buy needed goods and
services predominantly in the private marketplace. US business firms enjoy greater flexibility
than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay
off surplus workers, and to develop new products. At the same time, they face higher barriers to
enter their rivals\' home markets than foreign firms face entering US markets. US firms are at or
near the forefront in technological advances, especially in computers and in medical, aerospace,
and military equipment; their advantage has narrowed since the end of World War II. The onrush
of technology largely explains the gradual development of a \"two-tier labor market\" in which
those at the bottom lack the education and the professional/technical skills of those at the top
and, more and more, fail to get comparable pay raises, health insurance coverage, and other
benefits. Since 1975, practically all the gains in household income have gone to the top 20% of
households. Since 1996, dividends and capital gains have grown faster than wages or any other
category of after-tax income. Imported oil accounts for nearly 55% of US consumption. Crude
oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices
ate into consumers\' budgets and many individuals fell behind in their mortgage payments. Oil
prices climbed another 50% between 2006 and 2008, and bank foreclosures more than doubled
in the same period. Besides dampening the housing market, soaring oil prices caused a drop in
the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at
$840 billion in 2008. The sub-prime mortgage crisis, falling home prices, investment bank
failures, tight credit, and the global economic downturn pushed the United States into a recession
by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest
downturn since the Great Depression. To help stabilize financial markets, in October 2008 the
US Congress established a $700 billion Troubled Asset Relief Program (TARP). The
government used some of these funds to purchase equity in US banks and industrial
corporations, much of which had been returned to the government by early 2011. In January
2009 the US Congress passed and President Barack OBAMA signed a bill providing an
additional $787 billion fiscal stimulus to be used over 10 ye.
This weekly financial digest from BMO Nesbitt Burns provides an economic overview and outlook. It discusses recent economic data from Canada, the US, Europe and Asia. It also analyzes the potential economic impacts of the US presidential election and whether the outcome matters for financial markets. Global bond and equity market returns are provided. The document concludes with BMO Nesbitt Burns' economic and market outlook forecasts.
The state of the us economy marco annunziata ge market sense 1 nov12neiracar
The US economy continues to show resilience despite uncertainty from the upcoming fiscal cliff. Private consumption has strengthened due to improvements in the housing market and labor market. However, business investment and hiring remain constrained by policy uncertainty, particularly regarding how the large budget deficit will be addressed in the long run. If major fiscal policy issues can be resolved decisively in 2013, businesses may increase spending and hiring to boost economic growth. But continued uncertainty risks prolonging the current sluggish recovery.
- Global inflation has been trending downward since 2011 due to factors like technological innovation lowering prices and free trade increasing competition. However, the UK's inflation rate rose in 2016 as the falling pound since the Brexit vote began transmitting higher import prices to consumers.
- While UK inflation is projected to rise to around 2.5-2.75% by 2018-2019 as the pound's depreciation fully feeds through the economy, bond markets expect even higher inflation of 3.1%. Rising inflation could squeeze corporate profit margins and erode bond values as interest rates rise.
- Equity performance in a rising inflation environment depends on the stage of the economic cycle. Moderate inflation and interest rate hikes during growth periods are
Great lessons to be learned from Japan’s balance sheet recessionSwedbank
The document summarizes Japan's economic situation and outlook following the global recession. It finds that Japan has been hit harder than other countries due to its export-focused manufacturing sector and a strengthening yen. While the worst decline appears to be over as exports and production stabilize, the recovery will be fragile with continued overcapacity, weak demand, and dependence on growth in other countries like the US and China. The growth forecast estimates a 6.5% GDP decline in 2009 and a modest 1% growth in 2010, with adjustments and global imbalances slowing a sustained rebound. Lessons from Japan's experience with balance sheet recessions and asset bubbles are also relevant for other countries facing similar challenges.
1. The economic cycle refers to short-run fluctuations in national output (real GDP) around its long-term trend. It includes periods of boom, slowdown, recession, and recovery.
2. A recession is defined as at least six months of falling output across the economy. It can cause rising unemployment, falling business profits, and declining tax revenues.
3. Estimating the output gap, which is the difference between actual GDP and potential GDP, is difficult but important for understanding inflationary pressures and spare capacity in the economy. A negative output gap indicates unused resources while a positive gap risks inflation.
The document discusses factors that may have caused a decrease in the UK's international competitiveness between 2007-2008. These include: low investment and R&D spending, which hindered market growth and improvement; outdated infrastructure, especially for transportation, which impacted industry efficiency; and a shortage of skilled workers, lowering production quality. It also notes the global recession in 2008 reduced consumer spending and demand for services. Strategies to improve competitiveness mentioned include: increasing training to develop specialized skills; lowering business taxes; government incentives for investment; and subsidies to support growth industries. However, some strategies like trade barriers could spark retaliation, while tax cuts may not lower costs.
Latvia implemented an internal devaluation strategy in response to the global financial crisis rather than using exchange rate devaluation. This involved pro-cyclical fiscal policies like tax increases and government spending cuts to reduce wages and prices. While Latvia's GDP has grown since 2010, some economists are skeptical this can be sustained due to weak private investment and consumption from high debt levels. Latvia's economic growth remains heavily reliant on net trade exports.
The document discusses Brazil's economy between 2002 and 2011 based on two figures and an extract.
Figure 1 shows Brazil's GDP per capita increased from $7,800 to $11,700 over this period. Figure 2 shows Brazil's population grew from 176m to 203m. Therefore, Brazil's total GDP increased approximately 53% from $1.78 trillion to $2.73 trillion.
The extract mentions Brazil's currency, the Real, appreciated nearly 40% against other currencies since 2008. This was due to high interest rates attracting speculative capital inflows and increased exports of commodities like soybeans contributing to a current account surplus.
An appreciation could improve Brazil's current account balance in the short-
The document summarizes the Ma Foi Randstad Employment Trends Survey (MEtS) for the fourth quarter of 2011 and projected trends for the first quarter of 2012. The survey polled 639 companies across 13 sectors to assess employment trends in the organized sector. Key findings included expected increases in employment in sectors such as financial services, IT, and healthcare, while manufacturing saw more muted growth. The report analyzed trends by sector, salary increases, new hire experience and functions.
Reflecting a positive hiring outlook, the organized sector in India is expected to create about 1.6 million new jobs in the year 2012, as per the latest results of a survey from HR firm Ma Foi Randstad..
The document analyzes Sri Lanka's potential to achieve higher economic growth targets. It finds that Sri Lanka is well positioned due to recent macroeconomic gains like low inflation and unemployment. However, pursuing 9% growth would require overcoming challenges like a high budget deficit, "brain drain", and infrastructure deficits. The document recommends policies like privatization, fiscal reforms, and investing in education, infrastructure, and sustainable "green growth" to boost productivity and feasibility of higher targets while mitigating potential negative impacts on inequality and the environment.
http://pwc.to/1h2k2l4
Après cinq années de crise, de récession et de croissance décevante, nous pensons que les pays développés peuvent maintenant approcher de la "vitesse de libération" nécessaire pour une reprise durable.
Export nations need to ensure that supply chains remain as intact as possible. This means that when and where credit insurers are withdrawing from covering international trade during this crisis, the government exceptionally steps in. Otherwise there is a risk a collapse of finely woven supply chains.”
OCR F85 Global Economy June 2016 Key Definitionstutor2u
This resource brings together many of the key definitions for the June 2016 OCR F585 Global Economy paper. There are many more resources for this exam available from the Tutor2u website www.tutor2u.net/economics
The document summarizes the outlook and strategy of the Global Commodity Systematic Program (GCS) managed by Global Advisors. GCS uses a rules-based, non-discretionary approach to identify and manage trends across 35 commodity markets. It expects profitable opportunities over the next few years due to factors such as the devaluation of paper currencies, continued demand growth in emerging markets like China, a supply shock from reduced commodity investment, and increasing investment in commodities from stock market investors. Charts are presented supporting these views, and it is argued that if commodity markets exhibit strong trends, the GCS program will be able to generate strong returns managing those trends.
The document discusses expectations for key sectors in India's upcoming Union Budget for 2011-2012. It is expected that the budget will focus on increasing investments in agriculture and infrastructure to address issues like higher inflation, lower industrial growth, and lack of infrastructure investments. Specifically, the budget may increase funding for agriculture, irrigation, research and development, and infrastructure projects. It also discusses expectations for other sectors like power, metals, mining, oil and gas, cement, and automobiles. The overall aim of the budget is seen as accelerating GDP growth through these sectors while maintaining fiscal deficit targets.
China has the second largest economy globally and is projected to surpass the US by 2020. It has experienced strong and consistent GDP growth for decades, averaging around 7-9% annually, though growth has slowed recently. China has a one-party communist government and is transitioning its economy from manufacturing and exports to more domestic consumption and innovation. It faces challenges from a slowing housing market and global economic uncertainties.
State of the construction industry (2006 2007)Lisa Dehner
The construction industry surpassed $1 trillion for the third consecutive year in 2006, although growth slowed due to the residential sector. While residential construction grew by an average of $80 billion per year from 2002 to 2005, it only grew by less than $1 billion in 2006 and has declined $47 billion through May 2007. However, the industry overall remains in growth due to strength in non-residential sectors such as public construction. The US economy is substantially impacted by the slowing residential market, which influences retail markets. The construction industry is a major component of the US economy, so its growth moves with GDP.
Enersys Case Study - MBA Strategic Mgmt ClassSam Bishop
This document provides a strategic analysis of Enersys, Inc., a major industrial battery manufacturer. It discusses the company's internal strengths such as its strong financial position and global production capacity, as well as weaknesses like overreliance on lead-acid batteries. External opportunities include new technologies and partnerships, while threats include new entrants and rising material costs. The document analyzes the industry, Enersys' products and markets, and provides recommendations to transform and incrementally improve the company's strategy.
Intel Corporation (“Intel”) designs and manufactures
advanced integrated digital technology platforms that power
an increasingly connected world. A platform consists of
a microprocessor and chipset, and may be enhanced by
additional hardware, software, and services. The platforms
are used in a wide range of applications, such as PCs, laptops,
servers, tablets, smartphones, automobiles, automated
factory systems, and medical devices. Intel is also in the midst
of a corporate transformation that has seen its data-centric
businesses capture an increasing share of its revenue.
This report provides economic impact estimates for Intel in terms of employment, labor income, and gross domestic product (“GDP”) for the most recent historical year, 2019.1
After reading about the history of welfare in the USA, describe in y.pdfarihantmobilepoint15
After reading about the history of welfare in the USA, describe in your own words how our
current welfare system came to be. What are your thoughts about Sweden\'s welfare system?
How would creating a similar system in the USA impact the field of human services? Why does
the USA not have a welfare system similar to Sweden?
Solution
The US has the largest and most technologically powerful economy in the world, with a per
capita GDP of $49,800. In this market-oriented economy, private individuals and business firms
make most of the decisions, and the federal and state governments buy needed goods and
services predominantly in the private marketplace. US business firms enjoy greater flexibility
than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay
off surplus workers, and to develop new products. At the same time, they face higher barriers to
enter their rivals\' home markets than foreign firms face entering US markets. US firms are at or
near the forefront in technological advances, especially in computers and in medical, aerospace,
and military equipment; their advantage has narrowed since the end of World War II. The onrush
of technology largely explains the gradual development of a \"two-tier labor market\" in which
those at the bottom lack the education and the professional/technical skills of those at the top
and, more and more, fail to get comparable pay raises, health insurance coverage, and other
benefits. Since 1975, practically all the gains in household income have gone to the top 20% of
households. Since 1996, dividends and capital gains have grown faster than wages or any other
category of after-tax income. Imported oil accounts for nearly 55% of US consumption. Crude
oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices
ate into consumers\' budgets and many individuals fell behind in their mortgage payments. Oil
prices climbed another 50% between 2006 and 2008, and bank foreclosures more than doubled
in the same period. Besides dampening the housing market, soaring oil prices caused a drop in
the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at
$840 billion in 2008. The sub-prime mortgage crisis, falling home prices, investment bank
failures, tight credit, and the global economic downturn pushed the United States into a recession
by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest
downturn since the Great Depression. To help stabilize financial markets, in October 2008 the
US Congress established a $700 billion Troubled Asset Relief Program (TARP). The
government used some of these funds to purchase equity in US banks and industrial
corporations, much of which had been returned to the government by early 2011. In January
2009 the US Congress passed and President Barack OBAMA signed a bill providing an
additional $787 billion fiscal stimulus to be used over 10 ye.
This document discusses macroeconomic concepts including GDP, business cycles, economic growth, and technological progress. It explains that GDP measures the value of final goods and services produced, and economists use GDP and real GDP per capita to analyze economic performance and standards of living. The business cycle consists of expansion, peak, contraction and trough phases influenced by investment, interest rates, expectations and external shocks. Economic growth results from capital deepening, savings, population changes, government policies, and technological advances driven by factors like research, innovation, and education.
The immediate outlook for key markets and sectors
Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the
industries that make that economy tick - that you won’t find in the general press coverage of events.
Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies.
In this issue…
…we feature the following markets:
France – with a spotlight on the household appliances and dairy sectors
Austria – with a spotlight on the paper and timber sectors
Italy
Norway
Canada
New Zealand
Brazil
Japan
Special: Atradius Collections - Keep your cash flow healthy
This document summarizes a paper that examines the impact of Australia's recent minerals boom on manufacturing from 1989 to 2008. It begins with an introduction outlining the motivation and analytical approach. It then reviews relevant literature on commodity booms, industrialization, and the concept of "Dutch disease".
The paper draws on theoretical models by Corden and Neary (1982) and Krugman (1996) to analyze the effects of exchange rate appreciation on manufacturing. It analyzes financial data for 50 Australian manufacturing companies to qualitatively assess the impact. The results show non-traded goods firms generally fared well, while traded goods firms saw their competitiveness undermined by exchange rate changes, often relocating production offshore. The
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This document provides an overview of United Technologies Corporation (UTC). It discusses UTC's history, key products and segments, recent financial performance, competitors, and future plans. Specifically:
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1
5
Introduction
The economy of the United States is the world’s largest national economy in nominal terms and the second in terms of purchasing power parity globally. The economy’s currency the US dollar is used to settle most international transactions. The US economy is a mixed one. Its major trading partners are United Kingdom, Canada, Mexico, South Korea and Japan.
The United States’ economy is one of the high industrialized and diversified economies in the world. Its major industries include; energy, transport, healthcare, and agriculture. It is a leading exporter of innovation goods, arms, petroleum products, and electronics.
The Unites states is a consumption economy where most of the goods and services are consumed locally rather than for export promotion. Although the US is one world’s largest exporters of technology goods it imports heavily from Asian economies like China. Its main export markets are the European Union, Canada, China, and Mexico.
The US economy is still recovering from the 2008 global financial crisis. It is also grappling with plummeting oil prices and is greatly concerned about China growing exports into the economy (Potomac, 2010). Lastly, the economy is in a transition because of regime change.
Production output performance analysis
Real GDP
The real GDP is an inflation-adjusted macroeconomic measure of the value of all goods and services that are produced in an economy in a given year. In simple terms, it measures everything that a country produces in a particular year. It is usually expressed in constant prices which enable it to capture economic growth more accurately as compared to the nominal GDP (Feldstein, 1988). From the graph, we can deduce that the GDP of the US was initially rising from the year 2006 up to the year 2008. During this phase the economy was experiencing a boom and was healthy, employment rates were high and consumption was high. However, the economy slides into a recession in the year 2008. During this period the 2008 global financial crises happened. This led to a decline in US GDP, where it hit its lowest point in the last decade. This scenario persisted up to the year 2010. From 2010 the US economy is seen to be in a recovery where the GDP is increasing significantly over the years.
Real GDP Growth Rate
The real GDP growth rate is a measure of economic expansion in relation to real GDP from one financial year to another. It measures how fast the country’s economy is growing. It is largely driven by net exports, personal consumption, and government expenditure and business investment (Feldstein, 1988). From the graphical representation of the real GDP growth rate of US, we are starting with a positive figure which indicates that the economy is expanding healthy. If the economy is growing then by implication so is employment, personal incomes, and business. During the 2008-2009 global financial the economy went into recession and it can be seen that the real GDP growth ra ...
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In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
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After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
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Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
2. Table of Contents
Executive Summary...................................................................................................................................... 1
Introduction.................................................................................................................................................. 2
Economic Overview................................................................................................................................... 2
Industry Overview..................................................................................................................................... 2
Company Overview................................................................................................................................... 3
Company Strengths............................................................................................................................... 3
Company Weaknesses ......................................................................................................................... 3
Stock Valuation ............................................................................................................................................ 4
Constant Discount Growth Model ............................................................................................................ 4
Estimating the Growth Rate ................................................................................................................. 5
Estimating Expected Dividend .............................................................................................................. 5
Estimating the Required Rate of Return............................................................................................... 5
Capital Asset Pricing Model ............................................................................................................. 6
Dividend Discount Model................................................................................................................. 7
Bond Yield + 4% Model.................................................................................................................... 7
Required Rate of Return (Weighted Average of Methods) ............................................................. 7
Constant Growth Dividend Model Calculation..................................................................................... 8
Sensitivity Analysis................................................................................................................................ 8
Residual Income Model............................................................................................................................. 8
Price-Earnings Ratio Estimate................................................................................................................... 9
Price-Cash Flow Ratio Estimate ................................................................................................................ 9
Price-Sales Ratio Estimate ...................................................................................................................... 10
Conclusion .................................................................................................................................................. 10
3. 1
Executive Summary
I have applied fundamental analyses tools to estimate the intrinsic value for General Electric Company of
Fairfield, Connecticut. With an illustrious history, GE is the only company listed in the Dow Jones
Industrial Index today that was also included in the original index in 1896. A well-diversified industrial
corporation, the company’s product range includes jet engines, power generation equipment, financial
services, plastics and medical imaging.
GE’s strong financial position is hampered by a few variables that must be managed, such as the over-
diversification, concentration in the American and European markets and high debt levels. Despite these
challenges, GE has managed to deliver solid results with earnings of $16.1 billion and industrial cash flow
from operating activities of $17.8 billion in 2012 (General Electric, 2013). New projects in developing
markets and expansion of current markets will serve to strengthen the firm’s position and profit.
Five models or methods are used to estimate the intrinsic value of GE’s stock, specifically: the Constant
Dividend Growth Model, Residual Income Model, Price-Earnings Ratio Estimate, Price-Cash Flow
Estimate and Price-Sales Estimate. Each model produces results lower than current market price, so that
the current stock is considered over-priced. Since we would expect the market to self-correct toward
the lower intrinsic value of the stock, resulting in an expected U.S.decrease in stock market prices, the
recommended strategy is to short (sell) the over-priced stock at current market prices.
4. 2
I. Introduction
Economic Overview
The United States (“U.S.”) has the largest and most technologically powerful economy in the world, with
a per capita GDP of $49,800. In this market-oriented economy, private individuals and business firms
make most of the decisions, and the federal and state governments buy needed goods and services
predominantly in the private marketplace.
U.S. firms are at or near the forefront in technological advances, especially in computers and in medical,
aerospace, and military equipment. While U.S. business firms enjoy greater flexibility than their
counterparts regarding management decisions related to capital plant expansions, laying-off surplus
workers, and developing new products, they also face higher barriers to enter their global rivals' home
markets when compared to foreign firms entering U.S. markets. (Central Intelligence Agency (CIA), 2013)
Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax
income and imported oil accounts for nearly 55% of U.S. consumption. Between 2001 and 2008, soaring
oil prices dampened the housing market bubble, caused a drop in the value of the dollar and
deterioration in the U.S. merchandise trade deficit. The sub-prime mortgage crisis, falling home prices,
investment bank failures, tight credit, and the global economic downturn pushed the United States into
a recession by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and
longest downturn since the Great Depression. (CIA, 2013)
The government passed several bills between 2008 and 2011 in efforts to create jobs and help the
economy recover. Such bills provided funds to purchase equity in U.S. banks and industrial corporations,
for additional stimulus spending, tax cuts and health insurance reform. As a result, total spending on
health care rose from 9.0% of GDP in 1980 to 17.9% in 2010 and the federal budget deficit reached
nearly 9% of GDP in 2010 and 2011. In addition, the direct costs of the wars in Iraq and Afghanistan
totaled nearly $900 billion through 2011. Although the federal government reduced the growth of
spending in 2012, shrinking the deficit to 7.6% of GDP, U.S. revenues from taxes and other sources are
still lower, as a percentage of GDP, than those of most other countries. (CIA, 2013)
In December 2012, the Federal Reserve Board announced plans to purchase $85 billion per month of
mortgage-backed and Treasury securities in an effort to hold down long-term interest rates, and to keep
short term rates near zero until unemployment drops to 6.5% from the December rate of 7.8%, or until
inflation rises above 2.5%. However long-term economic problems, including stagnation of wages for
lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and
pension costs of an aging population, energy shortages, and sizable current account and budget deficits,
remain. (CIA, 2013)
Industry Overview
The U.S. Diversified Machinery Industry is recovering from the recession due to the increase in global
demand for machinery. Despite the setback from the recession, global markets, especially in developing
5. 3
countries, have helped balance out sales. Markets in China and India remain strong as development
continues, while U.S. companies involved in European markets are trimming down or selling off non-
core business endeavors. Because of the diverse nature of the industry, it had less exposure to the
recession than other niche industries and as the economy continues to recover, Diversified Machinery
companies such as General Electric are now posting profits. (Knight, 2010)
Company Overview
GE is the only company listed in the Dow Jones Industrial Index today that was also included in the
original index in 1896. GE traces its beginnings to Thomas A. Edison, who established Edison Electric
Light Company in 1878. In 1892, a merger of Edison General Electric Company and Thomson-Houston
Electric Company created General Electric Company. A well-diversified industrial corporation, the
company’s product range includes jet engines, power generation equipment, financial services, plastics
and medical imaging. (General Electric, 2013)
GE has posted earnings per share with an average growth of 8.65% in the past three years and profits of
$3.1 billion on revenues of $35.1 billion in its most recent quarter.
Strengths and weaknesses
STRENGTHS
Enhanced Reputation: General Electric has ventured into the world market thus gaining global
recognition for its unique goods and services. The Company’s products have been recognized for their
quality and the company is known for meeting customer-specific needs. As a result, it has attracted
numerous clients including corporations and government agencies and its competitive position is quite
favorable. In the year 2009, Forbes magazine ranked GE as the world's largest company and its brand
was the world's most recognized. This kind of recognition has given it a competitive edge over other
companies due to its ability to attract more customers. (Richet, n.d.)
Diversified lines of operation: GE has invested in a wide range of products under its units. These
activities range from technology, energy, automotives, and aviation and home appliances to financial
services and insurance services among other undertakings. This kind of diversification shields the
company from risks in case of misfortunes. (Richet, n.d.)
Strong R&D Capability: GE has utilized research and development in its ventures into environmental
initiatives Its 'Ecoimagination' program is undertaking the production of environmentally friendly
technologies, energy sources such as solar, low emission engines for airplanes, hybrid locomotives and
water purification. The company introduces new products each year that target its customer base or
expands into new markets. The ability to innovate is a source of competitive advantage to the company.
(Richet, n.d.)
WEAKNESSES
6. 4
Threat to flexibility: The Company currently utilizes a unique management style, whereby business
operations are divided into business units. Each business unit plays a distinct role within the company
and has its own independent management. Each unit is also part of its diversification strategy. Examples
include GE Commercial Finance, GE Equipment Services, GE Energy, GE Insurance, and GE Consumer
Finance among others. Such diversification and divisional structure can slow down decision making if not
properly managed. (Richet, n.d.)
High Debt Burden: The Company’s debt levels totaled $337.5 billion, an average annual increase of
36.70% since 1982. The company’s total debt to equity ratio increased 2.54 from 0.20 in 1982 to 2.74 in
2012. With increasing debt levels, the company is at risk of default, especially in light of the downgrade
of its creditworthiness from AA to Aa3 (or AA-) per Moody’s Credit Rating Agency.
Concentration in Eurozone and U.S. markets: The Company has significant operations in Europe and the
United Sates. As such, the weak Economic outlook for Eurozone and the US, two key markets of General
Electric, would put pressure on the revenues of the company. (yousigma, n.d.)
Stock Valuation
The intrinsic value of GE is estimated using several methods:
- Constant Dividend Model
- Residual Income Model
- Extrapolation using Price-Earning (P/E) Ratio
- Extrapolation using Price-Cash Flow (P/CF) Ratio
- Extrapolation using Price-Sales (P/S) Ratio
Constant Discount Growth Model
The Constant Dividend Model values a share of stock as the sum of all expected future dividend
payments, where the dividends are adjusted for risk and the time value of money and dividends are
assumed to grow at a constant rate g forever. In the constant discount growth model, stock prices
(today) are calculated as follows:
P0 = D1 / (ks-g)
Where g is the assumed growth rate, Ks is the discount rate or required rate of return and D1 is the
expected dividend. D1 can be calculated using the last known dividend and the growth rate as follows:
D1 = D0(1+g)
In order to calculate the Stock Price using the model, an estimate of the growth rate (g) and the
required rate of return (Ks) must be first calculated.
7. 5
Estimating the Growth Rate (g)
From Analyst estimates retrieved from www.finance.yahoo.com, we note that the growth rate for the
past 5 years is 0.56%, while the expected growth rate for the next 5 years is 10.24%. Therefore we
estimate our growth rate to be the average of the two rates:
g = (0.56% + 10.24%)/2
g = 5.42%
In addition, we note that the last paid dividend of $0.19 on June 20, 2013 is consistent with the $0.19
dividend paid five years ago on June 26, 2003. With no growth in our dividend, we will use the average
rate of historical and expected growth per analyst estimates.
Estimating the Expected Dividend (D1)
We calculate GE’s current year’s dividend (D0), which is the sum of the past four quarters of dividend
payments from information at www.finance.yahoo.com as follows:
Issue Date Dividend
6/20/2013 0.19
2/21/2013 0.19
12/20/2012 0.19
9/20/2012 0.17
Annual $0.74
With D0 calculated here and the growth rate estimated in the previous sub-section, we can now
estimate next year’s dividend (D1) using the formula previously given:
D1 = D0(1+g)
= $0.74 x (1+5.42%)
D1 = $0.78
Estimating the Required Rate of Return (Ks)
We will use three methods for estimating the required rate of return: the Capital Asset Pricing Model
(CAPM), the Dividend Discount Model (DDM) and the Bond Yield + 4% Model.
Capital Asset Pricing Model
The capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of
return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's
non-diversifiable risk. The model takes into account the asset's sensitivity to non-diversifiable risk (also
8. 6
known as systematic risk or market risk i.e. (β)), as well as the expected return of the market and the
expected return of a theoretical risk-free asset. The formula for the CAPM is as follows:
KRD = KRF + βRD (Market Risk Premium)
Where Market Risk Premium (MRP) = (KM – KRF)
Where KRD is the required rate of return, KRF is the return on risk free investment, βRD is the
market/systematic risk and KM is the expected return on the market.
We obtain the βRD from two sources, specifically www.finance.yahoo.com and www.morningstar.com
confirming the value to be 1.32. We also obtain the risk free rate (KRF) of 2.59% as represented by the
yield on the 10-year U.S. Treasury Bonds from www.finance.yahoo.com as well.
As our measure of historical returns for large cap stocks, we obtained the monthly stock price from 1950
to 2013 of the Standard & Poor’s 500 Index, which is designed to be a leading indicator of U.S. equities
and is meant to reflect the risk/return characteristics of the large cap universe. From the monthly
average return, we calculated the historical average annual return for large cap stocks to be 8.64%.
Hence, the Market Risk Premium is calculated as follows:
MRP = 8.64% - 2.59%
= 6.05%
Noting that the historical Market Risk Premium for large cap stocks is calculated to be 5.80 percent by
[text authors], we take an average of the two values to arrive at our MRP
MRP = (6.05% + 5.80%)/2
MRP = 5.92%
With MRP calculated, we calulcate the required rate of return/discount rate as follows:
KRD = KRF + βRD (Market Risk Premium)
= 2.59% + 1.32 (5.92%)
KRD = 10.41%
Dividend Discount Model (DDM)
Using the Dividend Discount Model (also the constant discount growth model), we can estimate the
required rate of return by solving for KRD
P0 = D1 / (kRD-g)
9. 7
KRD = D1/P0 + g
From previous sections, g is calculated to be 5.42%, D1 is calculated to be $0.78, and the current price is
$24.37. Hence, we calculate the required rate of return as follows:
KRD = $0.78/$24.27 + 5.42%
KRD = 8.62%
Bond Yield + 4% Model
In this model, the bond yield is dependent on the credit rating of the company plus 4%, which is
considered a reasonable incremental for a large cap mature stock like GE. Moody’s Credit Rating Agency
rated GE’s credit worthiness as Aa3 or AA-. From the composite bond yield rates available at
www.finance.yahoo.com, we find that AA 20-year Corporate Bonds have a yield of 4.19%, while A 20-
year Corporate bonds have a yield of 4.85%. Therefore GE’s AA- grade bonds would fall between the
range of 4.19% and 4.85%.
Noting that the bond ratings between AA and A bonds include AA- and A+ bonds, we prorate the
differential in points between the upper and lower yield limits and calculate the bond yield for AA-
bonds as follows:
Bond Yield = 4.19% + (4.85%-4.19%)/3
Bond Yield = 4.41%
Therefore KRD = 4.41% + 4.00%
KRD = 8.41%
With three estimates for KRD above, we calculate a weighted average of the three methods, using the
following subjective weights: CAPM 20%, DDM 60%, Bond yield+4% (20%).
Weighted Average Ks = 10.41%(0.20)+8.62%(0.60)+8.41%(0.20)
Weighted Average Ks = 8.93%
Constant Growth Dividend Model Calculation
With the reminder that P0 = D1 / (ks-g), where from the calcualtions above, D1 = $0.78, Ks = 8.93 and
g = 5.42%, the intrinsic value of the stock, using the constant growth dividend model is calculated as
follows:
P0 = $0.78 ÷ (8.93%-5.42%)
10. 8
P0 = $22.17
Sensitivity Analysis
We increase and decrease Ks and g by plus and minus 0.50% (.005) to find a range of values:
Ks g 5.42% + 0.50% 5.42% 5.42% - 0.50%
8.93% + 0.50% 22.17 19.41 17.26
8.93% 25.84 22.17 19.41
8.93% - 0.50% 30.97 25.84 22.17
As we can see from the above table, we find a range of values for General Electric Company from a low
of $17.26 to a high of $30.97. Since the market price of GE, $24.37, is in the upper range of intrinsic
value for GE, we conclude that it is overvalued.
Residual Income Model
The Residual income Model (RIM) determines the value of a stock by accounting for the income
generated by a firm after accounting for the true cost of capital, or the income in excess of
any opportunity costs measured relative to the book value of Shareholders' equity. The formula for the
RIM is as follows:
P0 = EPS1 – B0 x g / (k-g),
Where g is the assumed growth rate, Ks is the calculated required rate of return or discount rate, and
EPS1 is the expected earnings per share one year from now. EPS1 is estimated by
To estimate GE’s earnings per share one year from now, we note that GE’s earnings per share are
projected to grow at a rate of 1.09 percent per year, consistent with the calculated historical growth in
earnings per share from 2003 to 2012. If earnings continue to grow at this rate, next year’s earnings will
be equal to this year’s earnings times 1.0109. Current Earnings (EPS0) is noted to be 1.35 per
www.finance.yahoo.com. Therefore we calculate EPS1 as follows:
EPS1 = EPS0 (1+gEPS)
EPS1 = 1.35 x (1.0109),
EPS1 = 1.36
With our estimation of EPS1 above, the expected gEPS noted above, previous calculation of Ks in the
previous section and the retrieval of the current Book Value per Share (B0) of $11.95 per
www.finance.yahoo.com, we calculate the intrinsic value of the stock using the RIM model as follows:
11. 9
P0 = EPS1 – B0 x g / (k-g),
P0 = 1.36 – (11.95 x 1.09%) / (8.93%-1.09%)
P0 = $15.74
Comparing our intrinsic value per the RIM model to GE’s actual stock price of $24.37, we note that the
stock is overvalued.
Price-Earnings Ratio Estimate
GE has an average P/E Ratio of 14.70 for the past 5 years. Hence, we assume that the company’s stock
price will be 14.70 times its earnings per share one year from now. To estimate GE’s earnings per share
one year from now, we note that GE’s earnings per share are projected to grow at a rate of 5.42 percent
(g) per year as calculated earlier. If earnings continue to grow at this rate, next year’s earnings will be
equal to this year’s earnings times 1.0914. We obtain the current EPS of 1.35 from
www.finance.yahoo.com. Hence our calculation is as follows:
Expected Price = Historical P/E Ratio x Projected EPS
= Historical P/E Ratio x Current EPS x (1 + projected EPS growth rate)
= Historical P/E Ratio x Current EPS x (1 + g)
= 14.70 x 1.35 x 1.0524
Expected Price = $20.92
Comparing our expected price per the P/E ratio estimate model to GE’s actual stock price of $24.37, we
note that the stock is overvalued.
Price-Cash Flow Ratio Estimate
GE has an average P/CF Ratio of 5.70 for the past 5 years. Hence, we assume that the company’s stock
price will be 5.70 times its Cash Flow per Share (CFPS) one year from now. To estimate GE’s CFPS one
year from now, we note that GE’s CFPS is projected to grow at a rate of 10.17 percent per year,
consistent with the historical growth in CFPS from 1989 to 2012. If earnings continue to grow at this
rate, next year’s earnings will be equal to this year’s earnings times 1.1017. We obtain the current
Price/Cash Ratio of 8.81 from www.finance.yahoo.com, noting that the current price is $24.37.Hence
our calculation is as follows:
Expected Price = Historical P/CF Ratio x Projected CFPS
= Historical P/CF Ratio x Current CFPS x (1 + projected CFPS growth rate)
= Historical P/CF Ratio x Current CFPS x (1 + gCFPS)
12. 10
= 5.70 x $24.37/8.81 x 1.1017
= 5.70 x 2.77 x 1.1017
Expected Price = $17.36
Comparing our expected price per the P/CF ratio estimate model to GE’s actual stock price of $24.37, we
note that the stock is overvalued.
Price-Sales Ratio Estimate
GE has an average P/S Ratio of 1.24 for the past 5 years. Hence, we assume that the company’s stock
price will be 1.24 times its sales per share (SPS) one year from now. To estimate GE’s SPS one year from
now, we note that GE’s SPS is projected to grow at a rate of 6.36 percent per year, consistent with the
historical growth in earnings per share from 1982 to 2012. If earnings continue to grow at this rate, next
year’s earnings will be equal to this year’s earnings times 1.0636. We obtain the current Price/Sales
Ratio of 1.70 from www.finance.yahoo.com, noting that the current price is $24.37. Hence our
calculation is as follows:
Expected Price = Historical P/S Ratio x Projected SPS
= Historical P/S Ratio x Current SPS x (1 + projected SPS growth rate)
= Historical P/S Ratio x Current SPS x (1 + gSPS)
= 1.24 x (24.37/1.70) x 1.0636
= 1.24 x 14.31 x 1.0636
Expected Price = $18.87
Comparing our expected price per the P/S ratio estimate model to GE’s actual stock price of $24.37, we
note that the stock is overvalued.
Conclusion
The summary of the results of our valuation for GE stock using our five various methods are as follows:
Method Estimated P0
Constant Dividend Growth Method $22.17
Residual Income Method $15.74
P/E Ratio Estimate $20.92
P/CF Ratio Estimate $17.36
P/S Ratio Estimate $18.87
Actual Price $24.37
13. 11
We see that each model provides an intrinsic value estimate that is lower than the current price. As
such, we conclude that the stock is overpriced and would expect the market to adjust (decline)
accordingly. With an overpriced stock and our expectation of future decrease in price, the advisable
strategy would be to short (sell) the stock at today’s price.
However, as of June 30, 2013, GE Energy Financial Services India, a subsidiary, invested an approximate
22% stake in a 110 megawatt hydro-power project through a share subscription agreement in East
Sikkim to harness the water flow from the rivers Rangpo and Rongli, in a run-of-river design, with
turbines and generators supplied by Alstom India Ltd (General Electric Co, 2013). The following day, the
company announced its plans to expand its existing oil and gas facility in Fót, Hungary to host the state-
of-the-art manufacturing base of central unit control panels (UCP) for gas and steam turbine power
plants (General Electric Co, 2013). We therefore expect that the current price incorporated shareholder
expectations of returns on current investments. Hence, the expected decline in GE stock price could be
offset by gains from such projects.
14. 12
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2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
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Q&d=467d557449990fe54b28ec517303b854
General Electric Co. (2013, July 31). GE to Expand its Oil and Gas Facility in Fót, Hungary. Retrived August
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in-F%C3%B3t-Hungary-4150.aspx
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http://richet.hubpages.com/hub/SWOT-Analysis-of-General-Electric-Company
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