Consider investing in Woolworths Limited (WOW). Make an investment recommendation based on the theoretical value of WOW. Any assumptions that you rely upon should be clearly stated in the assignment. This requires you to complete several steps:
b. Select the most appropriate present value model and derive a theoretical price for the share
c. Determine whether you would invest in the company’s ordinary shares.
You should assume that the required rate of return is given by the Capital Asset Pricing Model, the equity market risk premium is 5%, and the risk-free rate is equal to the RBA cash rate at the time of your analysis. Any other assumptions that you rely upon should be clearly stated in the assignment.