American Intercontinental University guess and Capital FINA310-1202A-06 Financial focus compute face: Unit 3 Individual Project April 8, 2012 Abstract Using the troupe XYZ and its stemma information provided in the assignment guidelines as hearty as the link provided to Bloomberg, lead assist in the calculations for this project. One of the important objectives is the understanding of how theoretical transmit prices ar calculated as well as the effects of marketplace forces such as stakes ad interest paces. Using the guidelines provided and the formulas from the textbook here is how the calculations are achieved. ? Risk and Capital Risk-free rate of Interest The estimate of the safe rate of interest for a10-year rate for government bonds is 2.18% (Bloomberg, 2012). The assumed market risk premium is given as 7.5%. Values The pursuance information was retrieved from the XYZ filiation information and is as follows: XYZs beta (Ã) = 1.64 XYZs ongoing annual dividend = $.80 XYZs 3-year dividend growing rate (g) = 8.2% Industry P/En = 23.2 XYZs EPS = $4.87 CAPM CAPM will outright be used to calculate the companys undeniable rate of return (ks). CAPM: ks = Rf + (E(rm) - rf) x Beta (Brooks, 2013) ks = 2.18% + 7.5% x 1.64 = 14.48% ks = 14.
48% Current Stock retell (P) Using GCM, the current course price for XYZ will be calculated and this will be the theoretical price (Po). Po= Divo x (1+g) (Brooks, 2013) r-g Po = $.80 x (1+ 8.2%) = $7.36 = 1.1719 or $117.19 14.48% - 8.2% 6.28% Comparing Po and P The current ! stock repeat with XYZs stock information (P) will be put in and compared to the (Po) to touch on if there are any differences as well as the factors for the difference in the ii prices. P = $76.28 Po = $117.19 on that point is a difference in the above two prices. The CGMs response to the dividend growth rate, discount rate, and expected dividend grade are factors for the difference in the two...If you want to get a skilful essay, order it on our website: OrderCustomPaper.com
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