求carry!equity investment計數高手入

1.Morale Machinery Company, a company in the maturity stage of the industry life

cycle, is expected to pay a dividend of $3 in the upcoming year. The risk-free rate of

return is 5% and the expected return on the market portfolio is 14%. Analysts expect

the price of Morale Machinery Company shares to be $22 a year from now. The beta of Morale Machinery Company's stock is 1.4

A. Calculate the required rate of return on Morale's stock using CAPM

B. What is the intrinsic value of Morale's stock today?

C. Based on the constant discounted dividend model of common stock valuation, if

Morales intrinsic value is $24 today, what must be its growth rate?

2. The current market price of a stock is $50. The risk free rate and the expected

market return was 4% and 15% respectively. if the stock has a beta value of 1.2, the current year dividend(Do) is $2.40 and it is expected the company bore a constant

annual growth rate of 6% in the future. Decide whether you buy the stock? Show you calculation in detail.

1 個解答

評分
  • 5 年前
    最愛解答

    似乎都是很直接的題。

    E(R) = Rf + β[ E(Rm) - Rf ]

    P = D1/(k - g)

    R = (P1 - P0 + D)/P0

    2015-07-01 04:37:58 補充:

    圖片參考:https://s.yimg.com/lo/api/res/1.2/ZQit8r6YM3UMER1b...

    1.

    It is given:

    D₁ = 3, Rf = 5%, E(Rm) = 14%, P₁ = 22, β = 1.4

    (A)

    By CAPM, the required rate of return on Morale's stock is

    E(R)

    = Rf + β[ E(Rm) - Rf ]

    = 5% + 1.4(14% - 5%)

    = 17.6%

    (B)

    The intrinsic value of Morale's stock today is

    $P₀

    = $(P₁ + D₁)/[1 + E(R)]

    = $(22 + 3)/(1 + 17.6%)

    = $25/1.176

    = $21.25850340

    (C)

    Based on the constant discounted dividend model of common stock valuation, if the growth rate is g and the discount rate is k, then

    P₀ = D₁/(k - g)

    24 = 3/(17.6% - g)

    17.6% - g = 3/24

    g = 17.6% - 1/8

    g = 17.6% - 12.5%

    g = 5.1%

    The growth rate is 5.1%.

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    2.

    It is given:

    P₀ = 50, Rf = 4%, E(Rm) = 15%, β = 1.2, D₀ = 2.4, g = 6%

    By CAPM, the expected return is

    E(R)

    = Rf + β[ E(Rm) - Rf ]

    = 4% + 1.2(15% - 4%)

    = 17.2%

    Let R be the rate of return based on the given information.

    P₀ = D₁/(R - g)

    P₀ = D₀(1 + g)/(R - g)

    50 = 2.4(1.06)/(R - 0.06)

    R - 0.06 = 2.544/50

    R = 0.11088

    R = 11.088%

    R < E(R)

    According to the mean-beta diagram, the stock is now below the security market line (SML) which indicates the expected required return.

    That means, currently the stock is overpriced (too expensive).

    Therefore, we should NOT buy the stock now.

    It is expected that the price of the stock will drop in the long run (to achieve higher expected return) to reach equilibrium.

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