Read: ‘Corporate Finance,’ Berk and DeMarzo, Chapter 9; Review relevant class notes.

Prepare: Working individually, answer the questions below. Fill the shaded blank cells in the accompanying Excel template spreadsheet. Be sure to perform calculations by using formulas that refer to the collected data in the same file. Upload the Excel file with your work to Canvas.

Our goals: We will practice valuing an actual firm using the concepts and techniques introduced in the course.

You work in a large brokerage firm and your assignment is to analyze the stock of Nordstrom, Inc. (NYSE: JWN). Your boss recommends determining prices based on relative valuation (multiples), the dividend discount model and discounted free cash flow valuation method. You determine that Nordstrom’s cost of equity is 7% and its weighted average cost of capital is 5.5%. You estimate that Nordstrom’s dividends and free cash flows currently grow at 2% and forecast that they will continue to grow at 2% indefinitely.

To gather any additional information, go to Yahoo! Finance (finance.yahoo.com). Enter the symbol for Nordstrom (JWN). From the main page for Nordstrom, click “Statistics.” Note the following terms used on the website:

* Trailing Annual Dividend Rate’ is trailing annual dividend amount ($),

* EPS (TTM)’ is trailing twelve months EPS,

* levered free cash flows (TTM)’ is trailing twelve months FCFE.

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