Monday, December 24, 2012

Sav Assignment

Introduction The pursuance report outlines the valuation for Telstra Corporation Limited (TLS). Pre-valuation in week 3, I hypothesized that Telstra was undervalued. Through valuation, my assumption has been shown to be correct. military rank Method The valuation method chosen was the Gordon return Model. Such a model was chosen because it satisfied a series of conditions: 1. The reaping array is approximately the growth rate of the economy; an property that it is in stable growth. 2. The dividend payout policy is fairly fixed at $0.28 annually. 3. Pays out a substantial proportion of free property flow to equity as dividends. Market Data as of 24th Sept 2010 Previous Close| 52 week high| 52 week low| $ 2.67| $ 3.55| $ 2.63| P/E Ratio| 8.50| Sector| Telecommunication Services| Market cowl| $33,223 Million| | | | Beta| Company| Industry| 0.50| 0.48| Yield on 10 Year Treasury Bonds | Inflation as of June 2010| 5.052% 3.10%| Valuation| Calculated Earnings Per Share = $0.
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313 Dividend Per Share = $0.28 Payout Ratio = 89.46% Growth Rate = (1 Payout Ratio) * Return On Equity = 3.22% Cost Of Equity apply CAPM= 5.052% + 0.5*(4.5%) = 7.302% Value of Equity = Expected Dividends Nexy YearCost of Equity-Expected Growth Rate If one scarce inputs the data into the equation, the value per share would be $6.86, more than three-fold the current share price. However what is not taken into depend is that the inflation rate of 3.10% effectively nullifies the growth rate on real terms. If we modify the growth rate by subtracting the rate of inflation, the resultant value should give a more correct value. This value being: Modified Value of Equity= 0.287.807%-3.22%-3.1% = 0.287.807%-0.12 = $3.90 The following graph shows our sensitivity to the... If you want to get a enough essay, order it on our website: Orderessay

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