FIN355 Equity Securities Assignment, SUSS, Singapore: The Electric Vehicle (EV) Market Is Experiencing Rapid Growth. In Your Role As An Equity Research Analyst
Question 1
The electric vehicle (EV) market is experiencing rapid growth. In your role as an equity research analyst in Singapore, you’ve been tasked with covering the EV battery manufacturing industry. After some research, you find that CATL, a Chinese publicly listed company on the Shanghai Stock Exchange, is currently the largest EV battery manufacturer. You have also collected some information about CATL outlined below:

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You can assume that the risk-free rate is 2% and market risk premium is 6.5% in Singapore, and the risk-free rate is 3.5% and market risk premium is 2% in China.
(a) Use the above information to calculate the appropriate beta of CATL for your valuation purpose.
(b) Compute the recommended discount rate if you decide to use the FCFE model.
(c) A client (a small mutual fund) informs you that they have investments in several companies within the EV industry. As a result, the stock return of CATL may be highly positively correlated with their portfolio. Do you have to adjust the discount rate when you are presenting your analyses to this client? Why?
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