Stock valuation - Real world application forever, possible, concepts, valuation

glamorous

Hi,

I am trying to value a stock using the concepts i have learn t in CFA level 1. Below is the scenario.

Google (goog) B/S - Assets = 40bn
Liabilities = 4bn
Equity = 36bn (Retained Earnings - 20bn)

I/S - EPS = 20.11 (diluted) remaining same forever (perpetuity)

Total no of shares = 0.32bn

No dividends, assuming no growth rate.

I am trying to find the current value of the stock, i am trying to be as conservative as possible i am taking a ROR of 5.25% pa (10yr note) + 2% current US inflation (assumption)

Here is my calculation:

Current value as per the book + future earning
(36/0.32) + (20.11/0.0725) = 112.5 + 277.3 = 389.87

is this reasonable for stock valuation?

The intention of this exercise is to apply my knowledge directly to a real world scenario any healthy comments would be greatly appreciated. Thanks



Edited 1 time(s). Last edit at Wednesday, October 13, 2010 at 10:04AM by bigspydee.