BAO3403: Investment and Portfolio Management - Accounting and Finance Assignment Help

Assignment Task:

Task:

Instructions: This is an individual assessment and covers material you learnt in sessions 6 and 7. You are required to do it independently. Your answers will be not examined before the assignment is formally submitted to the drop box before the due time. Show all the formulas and detailed calculations you have performed. You need to upload this assignment before the due date as a word file showing your name and student ID as a header. The maximum similarity score accepted is 20%. Penalty for late submission is 10% of the marks obtained per day. This assignment or part thereof will not be accepted via email. Excel files are not required.
 

Case study 1
Part a.
You are an investment adviser. One of your clients approaches you for your advice on investing in equity shares of Theta Company. You have collected the following data:
Earnings per share last year $5.00
Payout ratio 0.40
Return on equity 0.30
Standard deviation of the returns of Theta company 0.40
Standard deviation of the market return 0.30
Correlation coefficient between Theta company’s returns and market returns 0.90
Yield on 3-month treasury bills 0.05
Expected market return 0.20
The company plans to increase the payout ratio to 50% after year 5.
 

Required:

i) Estimate the price of an equity share of this company using an appropriate dividend discount model and advise your client whether they should buy a share of the company.
ii) Your client is keen to know whether there are any positive growth opportunities from their investment. Explain to your client the meaning of this concept using appropriate calculations.

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