Estimate the impact of important announcement

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Reference no: EM133273034

1. Evaluate stock price, and estimate the impact of an important announcement on its stock prices for Qantas Airways Limited.

2. Stock beta: Download 3 years of weekly stock returns and ASX300 market index returns ending May 2022 from Yahoo Finance (or Bloomberg) and estimate the stock beta. Does the estimate of stock beta make sense to you? (The normal range of beta is from 0.5 to 3.) Provide reasoning, why or why not? If not, you have to use the stock beta from Yahoo Finance for the later parts. 

3. Estimate the Cost of equity, using the CAPM return. Assume the market risk premium, Rm-Rf=6%, and use the current 10-year Government bond yield for the risk-free rate.

4. DPS is the total annual dividend per share paid for the financial year. Based on the previous 5-year pattern of DPS payments, estimate the intrinsic values using 1-stage models (the constant dividend growth model), and the 2-stage non-constant dividend growth model. Please use the 10-year Government bond yield as the Dividend growth rate in the equilibrium stage. You need to choose which model is the most appropriate one to use, and compare the intrinsic value versus the share price as of May 2022 ('current price'). Would you recommend to buy or sell the shares in May 2022? Calculate share price by adjusting your beta +-10% of estimated beta values in part (a).

Reference no: EM133273034

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