Question
John Mayor is an analyst reviewing his valuation of PWS Insurance (PWS).He has the following information and assumptions regarding PWS. The current market price is
John Mayor is an analyst reviewing his valuation of PWS Insurance (PWS).He has the following information and assumptions regarding PWS.
The current market price is R67.53.
Mayor's estimate of PWS's intrinsic value is R70.
In addition to full correction of the difference between PWS's current price and intrinsic value, Mayorforecasts a price appreciation of R3.77 and cash dividend of R0.71 over the next year.
The required rate of return is 6.6%.
Use the information provided to:
1) Calculate Mayor's expected holding period return on PWS.
2) Calculate the ex-ante alpha of PWS.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate Mayors expected holding period return on PWS we need to consider both the price appreci...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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