Top-down approach and bottom-up approach to equity valuation

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Reference no: EM132065437

(a) Explain, using examples, the difference between a ‘top-down’ approach and a ‘bottom-up’ approach to equity valuation.

(b) There are four principles that underlie the concept of efficient markets. Outline, using examples, each principle.

(d) You are interested in buying a share that paid its last annual dividend 9 months ago. You can assume that the next dividend payment (3 months from today) will be €1.50. The company anticipates that dividend growth rates will be 5% annually for the next two dividends and 2% thereafter. Assuming the firm’s cost of equity rE is 9%, how much should you pay for the share?

Reference no: EM132065437

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