7. In a research note on the ordinary shares of the Milan Fashion Group dated ea

Question

7. In a research note on the ordinary shares of the Milan Fashion Group dated early July 2007 when a recent price was E7.73 and projected annual dividends were E0.05, an analyst stated a target price of E9.20. The research note did not discuss how the target price was obtained or how it should be interpreted. Assume the target price represents the expected price of Milan Fashion Group. What further specific pieces of information would you need to form an opinion on whether Milan Fashion Group was fairly valued, overvalued, or undervalued?

Explanation / Answer

target price = E9.20.

rate of return= (E9.20 +0.05)/ E7.73 -1.0= 0.197= 20%

rate of return20%-gives ------------> expected alpha value

hence -----------Milan Fashion Group was fairly valued,

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.