Question
Using the Dividend Growth Model and the Capital Asset Pricing Model calculate the Theoretical market price of CBA Limited's ordinary shares. You have been provided
Using the Dividend Growth Model and the Capital Asset Pricing Model calculate the Theoretical market price of CBA Limited's ordinary shares.
You have been provided with the following information:
- Government Bonds ar currently paying 6.5% per year.
- Expected returns of the Market Portfolio 12%.
- CBA Company's Beta is 0.95.
The next expected unfranked dividends $0.28 per Ordinary Share with a growth rate of 9.725% per year. Ordinary Shares current Market Price $10.00 per share.
Required:
(a) Calculate the Theoretical Market Price.
(b) Compare the Theoretical Market Price with the current Market Price and advice if CBA Limited's share is worth buying and why.
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Accounting Information Systems
Authors: Cynthia D Heagy, Constance M Lehmann
7th Edition
1111219516, 978-1111219512
