Johnson & Johnson Stock Valuations Analysis - Accounting Assignment Help

Assignment     

Task

As a new analyst for a large brokerage firm, you are anxious to demonstrate the skills you learned in your  MSc programme and prove that you are worth your attractive salary. Your first assignment is to analyse the  Johnson & Johnson stock. Your boss recommends determining prices based on both the dividend-discount  model and discounted free cash flow valuation methods. Johnson & Johnson uses a cost of equity of 8% and  an after-tax weighted cost of capital of 7%. It expects 12% return on new investments. However, you are a  little concerned because your finance professor has told you that these two valuation approaches can result in  widely differing estimates when applied to real data. You are really hoping that these alternative valuation  methods will reach similar prices.  

1. Go to Yahoo! Finance and enter the symbol for Johnson & Johnson (JNJ).  From the main page for JNJ, gather the following information and enter it into an Excel spreadsheet:  a. The current stock price (last trade).  

b. The current dividend amount.  

2. From the “Key Statistics” page, gather the following information and enter it on the same spreadsheet: 

a. The number of shares of stock outstanding.  

b. The payout ratio.  

3. From the “Analyst Estimates” page, find the expected growth rate for the next five years and enter it  onto to spreadsheet.  

4. Start Excel, create a new blank spreadsheet and select Data / From Web. In the New Web Query box,  paste the URL for Johnson & Johnson’s “Income Statement” of the web page and press return. Use the  little yellow and black arrow boxes to select the table containing the entire three years of income  statements and import them. Repeat this process for both the balance sheet and cash flow statements for  Johnson & Johnson. Keep all the different statements in the same Excel worksheet. 

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