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Question;FINANCIAL MANAGEMENT;CASE STUDY;Singapore;Post Limited (SingPost) is the national postal service provider in Singapore;offering trusted communications through domestic and international postal;services as well as end-to-end integrated mail solutions covering secure data;printing, letter-shopping, delivery and mailroom management, among others.;As;the trusted communications service provider for more than 150 years, SingPost;today goes beyond physical postal communications to offer secure digital;communications solutions as part of integrated solutions to its customers.;After;studying SingPost annual report for the financial year ended 31 March 2013, you;noted that its historical dividend payout was a follows;In;late-May 2014, SingPost announced that a unit of Chinese e-commerce giant;Alibaba Group Holdings Ltd bought a minority stake (of about 10% in the;enlarged capital) for $312.5 million to help set up an international e-commerce;logistics business. Many analysts expect considerable strategic advantages and;anticipate dividends to grow as follows;?;FY13/14;= 6.50 cents per share;?;FY14/15;= 6.75 cents per share;?;FY15/16;= 7.00 cents per share;?;Dividends;to grow at 1.00% per annum thereafter;Based;on your research, you noted that the market risk premium for Singapore equity;market is 5.00% and the current yield to maturity of the 20-year Singapore;Government Securities is 3.05%. Also, you noted from Reuters terminal that;SingPost has a beta of 0.3 and is currently trading at $1.65. The 1-year;historical price chart is shown below;You;are considering whether to invest in SingPost shares only or diversify your;investment portfolio by including the SPDR STI ETF, an exchange traded fund;that tracks the STI Index. You have extracted the following historical data;from Yahoo Finance;Year Ended 31 Dec;SingPost ($);SPDR STI ETF ($);2008;0.8;1.83;2009;1.01;2.89;2010;1.18;3.19;2011;0.94;2.65;2012;1.15;3.23;2013;1.35;3.13;Alternatively;you are contemplating to invest in the Singapore Government Securities instead;of SingPost. In particular, you noted that the 10-year government bond bears a;coupon of 2.75% (paid semi-annual) and has a face value of $100. The required;rate of return for this risk-free investment is 3.00%.;Question;1;Calculate;SingPost cost of equity by applying the Capital Asset Pricing Model (CAPM).;(10 marks);Question;2;(a);Calculate;the value of SingPost share assuming it continues to maintain its historical;dividend payout..;(10;marks);(b);Re-compute;the value of SingPost share assuming dividends will grow in line with the;analysts? estimates as a result from its strategic alliance with Alibaba.;(20 marks);Question;3;Based;on your computations above and comparing it with the traded price, assess;whether the Singapore equity market is efficient.;(15 marks);Question;4;Calculate;the average return and standard deviation for (i) SingPost, (ii) SPDR STI ETF;and (iii) a portfolio consisting 50% of SingPost and 50% SPDR STI ETF.;(30 marks);Question;5;SingPost;has a beta of 0.3 and a standard deviation, which you have computed earlier.;Examine the significance of both measures of risk.;(10 marks);Question;6;Calculate;the price that you should be paying for each 10-year government bond today.;(5 marks);---- END OF ASSIGNMENT ----


Paper#47903 | Written in 18-Jul-2015

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