financial-statement-data

1.Using the financial statement data for Advanced Micro Devices provided (the data and an Excel template^* you are encouraged to use are both available on Blackboard), along with the following assumptions, estimate the value (per share) of the company’s common stock.

^*If the financial statement data are entered correctly in the template for Homework Assignment 3, the data will not need to be reentered for Assignment 4.

• Sales are expected to grow at 20% per year for the next five years and 2% per year thereafter.
• The net operating profit margin and percentage of year-end net operating assets to sales will remain at the same levels as in 2018.
• The differential between nonoperating assets and nonoperating liabilities will remain the same as in 2018.
• The company faces a weighted average cost of capital of 6.5%.
• There are currently 733 shares of common stock outstanding.
• The growth rate in sales will be 12% for 8 years, and then 3% per year thereafter.
• The net operating profit margin will be each year.
• End-of-year NOA will be 21% of sales each year.
• The differential between nonoperating assets and nonoperating liabilities will remain the same as in 2018.
• The company faces a weighted average cost of capital of 6.25%.

Based on your projection and given its current stock price of $18.46, would you be inclined to recommend purchasing or selling the company’s stock?

2.You have concluded that the results from 2018 do not properly represent the correct assumptions about the future operating results for the company, its current restructuring of operations, and significant changes in its competitive situation. Therefore, you have decided to make the following changes in assumptions:

Based on your new projection and given its current stock price of $18.46, would you be inclined to recommend to purchase or to sell the company’s stock?