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Valuation of Equity

Valuation of Equity. Cost of Equity Capital. Regression to Find Beta. Cost of Equity Capital. Assumed 3.69% for the 30-year T-bond from Yahoo Finance and assumed 5% for the market risk premium

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Valuation of Equity

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  1. Valuation of Equity

  2. Cost of Equity Capital

  3. Regression to Find Beta

  4. Cost of Equity Capital Assumed 3.69% for the 30-year T-bond from Yahoo Finance and assumed 5% for the market risk premium Beta is reasonable because it states that Southwest is riskier than the market and this seems acceptable for the airline industry

  5. Using Analysts’ Forecasts

  6. Valuing Southwest ValueLine Forecasts for 2015 through 2019 Southwest Airlines Multiyear Forecasts of Earnings, Dividends and Implied Book Values per Share

  7. Equity Estimate using Residual Income Model

  8. Growth Rate Estimate using Residual Income Model

  9. Long-term Growth in Earnings/Sale

  10. Sensitivity Analysis Market Value of Southwest Enterprise = $17,049 Red= Sell White = Buy

  11. Works Cited • Capital IQ • SEC website • Module 9 from Valuation of Equity • 2013 10-K Earnings Conference Call

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