Identify Non - Marginal Investors We need to consider the future cash flow of the business to
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Question:
Identify NonMarginal Investors
We need to consider the future cash flow of the business to assess Santos ltd sustainability and profitability. However, the future cash flows must be discounted using the appropriate rate.
As discussed in week WACC is often used as an approximation for the rate. CAPM is often used as an approximation for the cost of equity. However, when there is a significantly high percentage of nonmarginal investors, other methods must be employed. In this assignment, we are only going to apply DGM as an alternative to CAPM and compare the two models. Your investigation into the type of investors in Santos ltd will assist in determining which model should be relied upon.
Focus your attention on identifying nonmarginal investors, such as founders, insiders, directors, and related companies like suppliers. Individual names, family trusts, private companies mostly share plans, and DRPs are all considered as nonmarginals. Nominees, custodians, banks, and investment companies are all considered marginal investors and should be ignored from discussion.
When there is a high percentage of nonmarginal investors, other calculation methods such as DGM must be considered in addition to CAPM. No marks are awarded for identifying marginal investors.
In addition to providing evidence of your research into nonmarginal investors, create a table listing the percentage of marginal vs nonmarginal investors.
of Marginal of Nonmarginal Total
Top shareholders
Remaining shareholders
Total
State clearly your assumptions of investors outside the top you may refer Refinitive workspace to justify
Related Book For
Auditing A Practical Approach
ISBN: 9780730382645
4th Edition
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton
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