Estimate the additional equity risk premium

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You are an analyst who specializes in semiconductors. Impressive Inc has operations in the U.S. whereas Imitation Inc has operations emerging markets. The current price earnings ratio for Impressive is 25 and the current price earnings ratio for imitation is 15. Both firms are in stable growth with a perpetual growth rate of 3.2%. Both Impressive and Imitation have a payout ratio of 60%. Both firms are also priced correctly via DCF approach.

Estimate the additional equity risk premium that the market is charging for Imitation Inc for being an emerging market semiconductor company.

Reference no: EM133227577

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