Question
You are trying to value A2M share today (End of June 2019). Assume the current price of the share in the stock market is $17.15
You are trying to value A2M share today (End of June 2019). Assume the current price of the share in the stock market is $17.15 and that you would like to hold the investment for 4 years. Assume that A2M will pay its first dividend ($0.5 AUD) one year from now. The total dividend will be paid as a lump sum (at once). After this you also estimate that the dividends will grow respectively at 30%, 25% per year. After that (starting in time 3) you estimate dividends will grow at a constant rate of 5% forever. Assume that today the Australian treasury notes is 1.5%, the market risk premium is 10% and the beta of A2M is 0.8. Based on this price would you purchase the share? Why or why not? [9 marks]
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