BUS 405 Week 2 Assignment Abbott Laboratories Problem
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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?

Bus 405 week 2 assignment abbott laboratories problem