1. Look up General Mills, Inc., and Kellogg Co. on the Standard & Poor's Market Insight Web site (http://www.mhhe.com/edumarketinsight). The companies' ticker symbols are GIS and K.
   1. What are the current dividend yield and price–earnings ratio (P/E) for each company? How do the yields and P/Es compare to the average for the food industry and for the stock market as a whole? (The stock market is represented by the S & P 500 index.)
   2. What are the growth rates of earnings per share (EPS) and dividends for each company over the last five years? Do these growth rates appear to reflect a steady trend that could be projected for the long-run future?
   3. Would you be confident in applying the constant-growth DCF valuation model to these companies' stocks? Why or why not?
   
   
2. Look up the following companies on the Standard & Poor's Market Insight Web site (http://www.mhhe.com/edumarketinsight): Citigroup (C), Dell Computer (DELL), Dow Chemical (DOW), Harley Davidson (HDI), and Pfizer, Inc. (PFE). Look at "Financial Highlights" and "Company Profile" for each company. You will note wide differences in these companies' price–earnings ratios. What are the possible explanations for these differences? Which would you classify as growth (high-PVGO) stocks and which as income stocks?
   
   
3. The Standard & Poor's Market Insight Web site (http://www.mhhe.com/edumarketinsight) contains information for all of the companies in Table 4-7 (36.0K) except for Cisco Systems. Update the calculations of PVGO as a percentage of stock price. For simplicity use the costs of equity given in Table 4-7 (36.0K) . You will need to track down an updated forecast of EPS, for example from MSN money (http://www.moneycentral.msn.com) or Yahoo.
1. What is the company’s dividend yield? How has it changed since 2001?
2. Table 4.2 projected growth of 2.6%. How fast have the company’s dividends and EPS actually grown since 2001?
3. Calculate a sustainable growth rate for the company based on its five-year average return on equity (ROE) and plowback ratio.
4. Given this updated information, would you modify the cost-of-equity estimate given in Table 4.2? Explain.

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