The purpose of this paper is to determine what I would pay for 100 shares of stock in Caterpillar Inc. to be delivered to me in one year. Currently, the average selling price of CAT stock is between $64.78 and $85.70 per share-today?s price was $73.43. For 100 shares of this stock to be delivered to me in one year, I would be willing to pay $8737.86. For this figure, I included a 3% discount rate. In the following paragraphs I will provide an explanation for these figures.
The first objective of this assignment was to estimate the price per share of this stock one year from now. I predict that the price of CAT stock one year from now will be $90 per share. Using a five year price history chart for Caterpillar I was unable to spot a usable trend because the prices were waffling with only a few peaks and valleys.
Peoria - Caterpillar Administration Building
Stocks
Plot of S&P Composite Real Price-Earnings Ratio an...I decided instead to use a couple of other indicators. CAT stock has a P/E ratio of 16.76 and an earnings per share (EPS) value of $3.92. Although the P/E ratio is relatively low, this stock is expected to do very well in the next year. In comparison to its competitors, this stock?s P/E has typically stayed somewhat relative to the overall industry (CAT-12.8%, Industry-13.37%). The EPS is expected to grow from $3.92 to $5.64 by December 2005. Because the P/E for this stock is relatively low and the expected EPS is high, this stock is a ?good buy? and people will start buying. As people buy, the demand will go up and so will the price, thus my estimate of $90. Analyst are predicting it to go much higher than that ($100-$111), however, the highest this stock has been in the last five...