Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Compare Jung and Adlers theories to Freuds psychoanalysis.

Answered: 1 week ago

Question

Excel caculation on cascade mental health clinic

Answered: 1 week ago

Question

4. Does cultural aptitude impact ones emotional intelligence?

Answered: 1 week ago