solution to Walter's approach and foreign exchange quote
This query is : Resolved
08 November 2008
3. (a) Walter’s Approach:
A company has a book value per share of Rs. 150. Its return on equity is 15% and it follows a policy of retaining 60% of its earnings. If the opportunity cost of capital is 18%, what is the price of the share today. According to Walter’s approach.
(c) Foreign Exchange:
The price of the pound sterling was quoted at $1.80 in New York and on the same date the DM spot rate was quoted at $.40.
• What would you expect the price of the pound to be in Germany?
• If the pound qas quoted in Frankfurt at DM 4.40/pound, what would you do to profit from the situation?
please send your answers to psrinivas1@in.com
A company has a book value per share of Rs. 150. Its return on equity is 15% and it follows a policy of retaining 60% of its earnings. If the opportunity cost of capital is 18%, what is the price of the share today. According to Walter’s approach.
(c) Foreign Exchange:
The price of the pound sterling was quoted at $1.80 in New York and on the same date the DM spot rate was quoted at $.40.
• What would you expect the price of the pound to be in Germany?
• If the pound qas quoted in Frankfurt at DM 4.40/pound, what would you do to profit from the situation?
please send your answers to psrinivas1@in.com
Deepak Agrawal
(Expert)
11 November 2008
3.a)
Provide EPS amount.
Formula is: EPS amount*60%*18/15
Provide EPS amount.
Formula is: EPS amount*60%*18/15
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