use CAPM to estimate ANZ bank's stock valuation

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Expert Solution

when we will be using Capital Asset pricing model to estimate the Australia and New Zealand bank stock valuation then we will ascertain the current economic condition of New Zealand in order to find out the risk free rate.

The current list free rate of New Zealand government securities is around 3% when we are looking in from the perspective of five years of historical average.

If we are finding out the overall market rate of return in current economic scenario which will be currently around 5% because there has not been high expectation of out performance of market during the times of coronavirus crisis

The beta of Australia and New Zealand bank is around 1.42

Expected rate of return of ANZ stock= risk free rate+(beta (market rate of return -risk free rate)

= 3+1.42(5-3)

= 5.84%

Total earnings of the company= 2972 mil.

Total market capitalisation= (total earning for equity shareholders / cost of equity)

=(2972/5.84%)=$50890 Millions.

jeff jeffy answered 1 year ago

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