CAPM Illustration 4


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The following data pertain to the value of underlying factors of A Ltd.’s shares.

 

Value of Underlying Factors

 

Original

Revised

Risk-free rate

Market risk premium

Beta

Expected growth rate

Previous dividend

10%

5%

1.2

6%

2

8%

6%

1.5

8%

2

(a)   What is the intrinsic value of A Ltd.’s share based on the original set of values?

(b)   What will it be under the revised set of values?

 


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