.Follow the instruction to write 10 pages paperAll the work must be originalTurnitin report is required
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As part of the 2019 Budget, the Commonwealth Government of Australia has announced its
intention to privatise part of its information technology services. Currently these services are
run as a separate agency wholly-owned by the Commonwealth Government called
“Information Technology Australia”. However, the government would like to create a public
company out of these operations by selling 100%of its stake to the members of the public and
therefore listing the business on the Australian Securities Exchange. The Budget papers have
suggested an indicative value of around A$2 billion for the business.
You are an equity analyst employed to advise the Commonwealth Government. You have
been asked to prepare a report detailing a possible share price for the business using the
constant dividend growth model.
Required:
1. Select one (or more) proxy company (or companies) that can be used to determine a
possible beta for Information Technology Australia. Explain why this is necessary and justify
your choice/s.
2. Using data from your proxy company (companies) calculate its (their) beta(s). Using suitable
academic literature, justify your data choices with respect to time horizon, measurement
interval,
measurement of returns, and market index.
3. Determine the appropriate beta for Information Technology Australia assuming the
company has an expected market debt to equity ratio of 0.67. Clearly explain how you have
determined your beta.
4. Calculate the required return on equity for Information Technology Australia using the
Capital Asset Pricing Model (CAPM). Justify the data choices you have made in undertaking
this calculation.
5. Assuming the Information Technology Australia expects to pay a dividend of $0.50 next year
and that the dividend is expected to grow at 4% pa forever, what would be an appropriate
price for the government to sell Information Technology Australia shares? With reference to
appropriate academic literature, justify your recommendation
What’s included in the 10-page limit?
– Assignment body
– Tables
– Diagrams
What’s excluded from the 10-page limit?
– Executive summary
– Title page
– Table of contents
– Reference List
– Appendices
…
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