(WOOLWORTHS LIMITED (WOW) 2013). The aim of this report is to estimate and determine the dividend growth rate‚ stock return and current share price of Woolworths. Methods used for the estimation include dividend growth model‚ Capital Asset Pricing Model (CAPM) and Gordon’s Growth Model. The results of the estimation indicate that the dividend payments will continuous increasing in the future‚ the return on the company’s assets is reasonable and its share price is expected to rise. In addition‚ recommendations
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18‚ 2008‚ determine the total market value of your company’s equity. $54.60 6. If the betas for your company that you found in Part 1 of the Course Project differ‚ then which beta will you use to determine your company’s cost of equity using the CAPM/SML‚ and why? There were three different betas from part 1 (0.6889‚ 0.77‚ 1.137). The highest value‚ 1.137‚ will be used to determine the company’s cost of equity because it will represent the worst case scenario for our calculations (i.e. a beta
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Sauder School of Business Finance Division COMM 371 Sep-Dec 2011 Gonzalo Morales Marked Problem Set 2 - Solution Notes 1. First‚ compute the correlation coefficient between assets A and B ρ(RA ‚ RB ) = Cov (RA ‚ RB ) −0.0322 = = −1. σ (RA )σ (RB ) 0.14 × 0.23 The assets are perfectly negatively correlated. Consider portfolio P formed from assets A and B such that you invest α fraction of your wealth into A and (1 − α) fraction into B. The variance of such portfolio is σ (RP
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company will require additional long-term capital financing. Long-term financing involves debt or equity instruments with greater than one-year maturities‚ and the cost of this long-term capital can be calculated using either the Capital Asset Pricing (CAPM) or Discounted Cash Flows (DCFM) Model. The organization will have to compare and contrast the Capital Asset Pricing Model with the Discounted Cash Flows Model. The skill of comparing and contrasting financial options will help evaluate
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enhanced by the inclusion of a risk-free investment that pays 1%. Does access to this asset change your answer to 1e) above? Feel free to use calculations. 3. What is the beta of Small in the problem above? What is the beta of Big? If the CAPM is true‚ is Small in equilibrium‚ is it undervalued or is it overvalued? What about Big? You may continue to assume that the risk-free rate is 1%. 4. Download the spreadsheet labeled “Homework 3 Problem 4 Spreadsheet” from the course website
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Ford Date: 2/13/13 Subject: Nike’s Cost of Capital I agree with Ms. Ford’s estimate of Nike’s Cost of Capital at 8.4% The WACC is the appropriate method for valuing Nike’s capital. The WACC takes your cost of debt x the percent of capital + CAPM x equity percent of capital and it tells the rate of return the company needs to return based on its capital structure. In my opinion Ms. Ford has correctly assumed Nikes cost of debt and cost of equity. Her projection for cost of debt uses the Japanese
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Chapter 8 Risk and Return: Capital Market Theory 8-1. To find the expected return from James Fromholtz’s investment opportunity‚ we will use equation 7-3: where i indexes the various states of nature that are possible. We can picture the states of nature for James’s opportunity as: Despite the symmetrical appearance of the graph‚ the outcomes are not symmetrical: There are many more outcomes that are positive than negative. Only the 100% return (probability 5%) is negative; 95% of the weight
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The rate of return on equity represents the percentage return a company needs to achieve to be worth investing in. Using the Capital Asset Pricing Model (CAPM)‚ as it’s the most widely used and best known model of risk and return‚ we can determine the required rate of return on equity of Naturally Fresh Plc. The basic principle of CAPM is to compensate investors by considering the risk and time value of money. It represents this by incorporating the following factors: 1. A risk- free rate(rf)
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decisions page 5 THE FIVE OUTCOMES: BE HEALTHY STAY SAFE ENJOY AND ACHIEVE MAKE A POSITIVE CONTRIBUTION ACHIEVE ECONOMIC WELL-BEING How do practitioners promote these to my child? All practitioners have a duty to promote these 5 ECM (every child matters) outcomes and to support your child or young person to achieve them. Here is how they do it Be healthy. Practitioners promote this by always having healthy snacks and lunch and only offering milk or water as a drink unless you
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viewpoint of investors. Explain your reasoning a. A large fire severely damages three major U.S. cities. b. A substantial unexpected rise in the price of oil. c. A major lawsuit is filed against one large publicly traded corporation. 2. Use the CAPM to answer the following questions: a. Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 10%‚ the Risk-Free Rate is 3%‚ and the Beta (b) for Asset "i" is 1.5. b. Find the Risk-Free Rate
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