t is now early January 2022. You are working in an investment banking company called XYZ as an equity research analyst. A customer approached you and asked you to give her a recommendation on Telstra Corporation Limited (TLS.AX). The customer's investment horizon is June 2026. The website of this firm is in the following link: https://www.telstra.com.au/aboutus/investors In this link, you will find the firm's financial reports, share price, governance details, latest news, etc. Analysts' forecasts and other important details about this firm can be also found in the following links on yahoo finance and ASX: https://au.finance.yahoo.com/quote/TLS.AX?p=TLS.AX https://www2.asx.com.au/markets/company/tls Analysts' expected growth rate of EPS for the next 5 years is available on yahoo finance. Once you have opened the above link, click on "Analysis" and you will get a table that contains the expected growth rate of EPS over the next 5 years "4.95% p.a". Use this 5-year growth rate reported in the table and the EPS for June 2021 to forecast EPS for June 2022, 2023, 2024, 2025 and 2026. Calculate the dividend payout ratio from the reports of the firm and use it to forecast DPS and BPS up to June 2026. The example in lecture 4 notes, slide 20, is useful in this regard. Do not forget to calculate the CV in June 2026 using the long-run average growth rate of the GDP, which is around 3.36%. You need to calculate the required rate of return on TLS's stock. To calculate it, you need to find the risk- free rate of return on 5-year government bonds from the website of the reserve bank of Australia: http://www.rba.gov.au/statistics/tables/#interest-rates from the above link, the risk-free rate on 5-year government bonds in January 2022 was 1.54%. Second, you need the beta of the stock, which is available to you on yahoo finance (0.53), so you can use it straightforward. Use the stock's beta, the risk-free rate of return and the long-run average stock return of 11.5% to calculate the required return according to the CAPM model. For TLS's stock, the required return = 1.54% + 0.53(1 1.5%-1.54%) = 6.82%. You should use this required return in the valuation. For those interested in knowing how to calculate a stock's beta, follow the following steps. First, download the historical monthly stock prices of TLS during the past 5 years and calculate the monthly returns on the stock. On Yahoo! Finance link above, you will find the historical prices available on the menu under the heading titled "Historical Data". Open it to get the monthly stock prices for the past five years. Next, you have to do the same for the market index (use S&P/ASX 200 index) by downloading the monthly prices of the index for the past 5 years and calculating the return on the index. The link you need is as follows: https://au.finance.yahoo.com/q/hp?s=^AXJO Finally, regress the monthly stock returns, Ry, on the monthly index returns, Rm, using the following regression: Ri= at B. Rmte The coefficient you obtain from the above regression, B, is the stock's beta. Required: Prepare an equity research report for this firm. In the valuation section, use dividend discount model (DDM) and the residual income model (RE), then calculate the average value. You need o calculate the average value early January 2022, compare it with the market price at that time ($4.20) and give your recommendation