Finc2011 Major Assignment Essay

1893 Words Sep 20th, 2013 8 Pages
Woolworths Limited Valuation Report

Executive summary
Woolworths Limited (WOW), which is one of the listed companies in Australian Security Exchange (ASX) (ASX 200), is the largest supermarket in Australia (Kruger 2013), it specializes in the groceries, food and retailing (WOOLWORTHS LIMITED (WOW) 2013). The aim of this report is to estimate and determine the dividend growth rate, stock return and current share price of Woolworths. Methods used for the estimation include dividend growth model, Capital Asset Pricing Model (CAPM) and Gordon’s Growth Model. The results of the estimation indicate that the dividend payments will continuous increasing in the future, the return on the company’s assets is reasonable and its share price is
…show more content…
In this stage, the risky required return (rm), the same as market return, should be calculated. Stock market index is an approach to evaluate the value of stock market and S&P/ASX 200 is the most significant stock market index which tracks the performance of two hundred big Australian corporations (Australia Stock Market (S&P/ASX 200) 2013). Currently, S&P/ASX 200 is a primary share market index in Australia which replaced the All Ordinaries in April 2000 and has become the benchmark for investment for the Australian Securities Exchange (ASX) (ASX 200 2013). Therefore, S&P/ASX 200 is the best indicator of the market return and used to determine the market return.
Source:
https://blackboard.econ.usyd.edu.au/bbcswebdav/pid-636137-dt-content-rid-201558_2/courses/FINC2011_SEM1_2013/All%20Ords%20Accumulation%20Indices.xls

Based on the data from S&P/ASX 200 Accumulation index (daily), which is provided by Mellare (2013), the yearly index could be calculated by averaging all of the daily indexes for that year. Yearly market return (rm) can be determined by:

In which, old market index refers to the index for year t and new index is the index for year (t+1).

A table for the calculation of market return will be created in a similar way with the S&P/ ASX200 table (see Appendix – 1) for the periods of 10 years in order to comply with ASX.

Due to the prices in 2013 is not completed, the market
Open Document