Question
Can I get a written answer for this(on paper if possible) NOT excel please and include the relevant equations for each question as well. This
Can I get a written answer for this(on paper if possible) NOT excel please and include the relevant equations for each question as well.
This was all the information given in the question.
A quick response would be greatly appreciated! Thank you so much! <3
Show all your workings when calculations are required and round off your FINAL result to TWO decimal places.
Westfield is a listed company with a beta of 1.3, a current share price of $8 and an EPS of $8. It is expected to pay a dividend of $1/share at the end of year 3 and dividends will grow at a constant rate of 3% per annum forever. The long-term return of the ASX200 (i.e. the market portfolio) is 8% p.a. and the market risk premium is 5% p.a. Eastfield is a competitor company with a share price of $10 and an EPS of $20.
a) Using the P/E ratio, identify the company with cheaper shares and briefly explain why. Ignore risk. [3 marks]
b) Using CAPM, calculate the expected rate of return of Westfield. [4 marks]
c) What is the implied value of a Westfield share today? [6 marks]
d) Given the current share price of Westfield, would you purchase it and why? [2 marks]
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