Question

can you explain the general financial analysis of the Whole Foods company, related to the divident discount model, please provide the answer clearly.

Answer 1

Whole foods company generally offers with the dividend of $.72 per share and the dividend are expected to grow 5% in coming years.

The overall required rate of return when we will be trying to calculate using Capital Asset pricing model will be equal to 15% according to the current needs of the market

Hence the price of the share according to dividend discount model be as follows

=[Dividend paid at the end of the year1]/(required rate of return minus growth rate)

=[.72/15-5]=$72

hence the company is currently undervalued as it is trading in the range of 45 so it has a potential of going up to 72.