Explain what would happen to your valuation

Assignment Help Finance Basics

Reference no: EM133715743

Question: Now that the pandemic and lockdowns are over, you think that people will travel again, and therefore you are thinking of buying shares in Qantas Limited (QAN). You expect QAN to pay dividends of $0.22, $0.26 and $0.32 over the next three years and then you believe dividends will grow at a rate of 6% a year. Assume the required return on equity for QAN is 11%. (a) Calculate the valuation for QAN shares today using the mixed growth dividend discount model (DDM). If the current market price for QAN shares is $5.41, should you buy them? Explain your answer.

(b) Explain what would happen to your valuation if you: Decreased your growth rate assumption for the QAN dividend. Increased your required rate of return for QAN.

Reference no: EM133715743

Questions Cloud

Calculate the net present value of this project : Calculate the net present value (NPV) of this project. Should the project be accepted or rejected? Explain your answer.

What assumptions would we have to make : Say QAN has before tax free cash flow (FCF) per share of $0.50. Given this, calculate the value of QAN shares using the WACC from Part (a).

How can an organization design a compensation system : How can an organization design a compensation system that aligns with its performance management system, and what are some benefits of doing so?

What are some of the challenges of leading like jesus : What are some of the challenges of leading like Jesus in an organization? What are some of the cultural characteristics that can diminish servant leadership?

Explain what would happen to your valuation : Explain what would happen to your valuation if you: Decreased your growth rate assumption for the QAN dividend. Increased your required rate of return for QAN

Why are u.s treasuries considered safe and how can one lose : Why are U.S treasuries considered safe and how can one lose money by investing in them? How do investors use bond ratings when investing?

What types of markets are stocks traded in : What types of markets are stocks traded in? Name 3 well known stock markets in the U.S

Discuss the various theories the organization would use : Using the text and suggested readings, discuss the various theories the organization would use to design and implement program services.

What is the projects internal rate of return : A project with an initial cost of $53,640 is expected to generate annual cash flows of $17,790 for the next 5 years. What is the project's internal rate

User Account

All Pages