Valuation Project

  (a) Calculate Home Depot's cost of equity using CAPM. (b) Calculate Home Depot's cost of debt. (c) Calculate Home Depot's WACC. (d) Provide a thorough justification for your choice of the growth rate after year 4. Clearly state any other assumptions you have made. (e) Estimate the years 1-4 free cash flow and the terminal value at the end of year 4. (f) Find the value of Home Depot. (g) Compare your valuation with the current share price of Home Depot. Based on your evaluation, would you conclude that the company’s stock is currently overvalued or undervalued? (h) How would your conclusion in part (g) affect Amazon’s incentive to acquire Home Depot? (i) Determine how sensitive your valuation is to a ±1% change in the average sales growth rate over the last 4 years. Discuss the impact of such changes on your conclusion. (j) Discuss any limitations of your analysis. Your discussion should include a critical evaluation of your assumption (s) and those of your lead partner. Make sure your discussion is specific and linked to the real environment in which Home Depot operates.