1.Estimate future annual dividends, cash flows to shareholders in the next five years using the estimated firm’s five-year growth rate, or industry five-year growth, or the combination. After five years, assume firm growths at economy wide steady state growth rate (e.g., S&P 500 five-year growth rate) forever.
2. Estimate the beta of the firm and market risk premium (You may use the beta in Yahoo Finance and use the mean of annual market excess return (Rm-Rf) and risk free rate (Rf) in French’s webpage to proxy market risk premium). Then estimate expected return using CAPM.
Recently Asked Questions
- What is the beta of the following portfolio? Stock Beta Investment A 1.2 50,000 B 0.7 80,000 C 0.5 30,000 D 1.4 40,000 Round to the second decimal place.
- · How can you continue to examine your career goals over time? How can you stay current in terms of assessing career opportunities? What would
- Consider the AR(1) process given below. Y t= φ 0 + φ 1 Y t-1 + ε t Where ϕ 0 ≠ 0, |ϕ 1 | <1 and ε t is a white noise error term. Suppose