calculate the Intrinsic Value using the Constant Growth DDM;Using the following information, calculate the Intrinsic Value using the Constant Growth DDM; Show all of your work

EQUITY PROJECT – INVESTMENTS [10% of your grade]
FIN 345 – Spring 2016
This project will make you more familiar with some of the basic techniques of equity valuation.
The company you are analyzing is 3M (symbol MMM).Assume that the latest information you have is as of 12/31/15.

You may use financial sites on the internet for your financial data. If you use a website other than the company’s website, make sure it is bona fide financial resource.

At the company’s website you can pull up the 2014 Annual Report, which contains the 10-K. You will find everything you need in the Financial Summary, the Income Statement, the Balance Sheet, and the Statement of Cash Flows. Use the data for 12/31/14 (and 12/31/13, if needed).
1. Describe this company, its strategy, and its main businesses. [One page].

2. Create a 10-year graph of this company’s stock price in Excelby finding the data on the internet. Use month-end prices. Weekly is also acceptable.Copy the image to your project.Use “Closing Price”, and not the “Adjusted Closing Price”.

3. Using the following information, calculate the Intrinsic Value using the Constant Growth DDM; Show all of your work.

a. Calculatethecompany’s 1, 5, 10 and 20 year geometric average dividend growth rates for the period ended December 31, 2015.Use only the 20-year growth rate as the dividend growth rate for your model. (Round to four decimal places, e.g., if you calculate .0973475, the rate would be .0973, or 9.73%.) Make sure the dividend data is split-adjusted![Note: The company’s dividend history can be found on its website.]

b. Use an 11.0% required rate of return (“k”).

c. Using the formula from class, calculate the Intrinsic Value.Show all of your work!

4. Using an Excel spreadsheet, create an Intrinsic Value Sensitivity Analysis table for this company. Use discount rates from 5% to 15%, with 1% increments. Use growth rates of 0% to 12% with 2% increments. Copy this Excel table into your project.

5. From the Sensitivity Analysis, write out by hand all of the calculations that would give you the intrinsic values for a12% discount rate and 8% growth rate.

6. Calculate the company’s annual dividend yields for each of the past 10 years ended 12/31/15. (Use year-end prices.)Then, plot the 10-year dividend yield history on a graph.

7. Calculate the company’s Current Dividend Yield and Indicated Dividend Yield. Use data for the 12 months ended 12/31/15.Show all of your work!

8. You are the Wall Street equity analyst. Given the company’s12/31/2015 stock price (which you must find on-line), and using your answers from above, determine whether you would recommend a BUY or SELL on this stock. State your estimated target price based on your prior calculations, and explain your answer in ½ to 1 page.

9. Assume that your clients already own the stock at $135.00 per share; would you BUY MORE, HOLD, or SELL? Explain your answer in one paragraph.
THIS PROJECT MUST BE TURNED IN AT THE BEGINNING OF CLASS.
Points (100 points total)

1. 10 points
2. 10 points
3. 20 points
4. 10 points
5. 5 points
6. 20 points
7. 10 points
8. 10 points
9. 5 points