Capital Asset Pricing Models

Running head: PRICING MODELS Pricing puzzles Adam F. Thornton break water 501 3 TUI University Dr. William Anderson Chipotle Mexican Grill (CMG) is one of the fastest growing eating house chains in the United States. Self proclaimed as fast-casual, CMG offers a dining experience that is unique, organic, and which draws from the local economy. For the investor, CMG is a knowing investment for the aggressive and fast growing portion of a portfolio. When determining an appropriate impersonate to evaluate CMGs potential, the detonator Asset Pricing Model (CAPM) is the topper choice. This model offers the best amount detail while maintaining the simplicity needed for a model outlining investment decisions in CMG. The Pricing Models There be three pricing models to discuss when evaluating CMG: dividend yield, CAPM, and the Arbitrage Pricing theory (APT). Each of these models has both advantages and disadvantages, easily tailoring one model to different situations. However, the CAPM is best suit for this case with CMG. Below is a further review on each of models advantages and disadvantages, and applicability to CMGs market position and financial situation.

The Gordon Growth Model The Gordon Growth Model (GGM) is a very simple model for estimating the nurture of a stock. This equation works by calculating the stock value from dividends per share, the required identify of return for the equity investor, and growth esteem in dividends (Gordon, 2008). The equation looks like this: Stock Value (P) = D / (k-G). Where D is the expected dividend per share one year from now, k is the required put of return for the equity investor, and G is the growth rate in perpetuity. This dividend growth model is best suited for a firm growing at a rate comparable to or lower than the nominal growth rate in the economy and which have well established dividend payout policies that they destine to continue in the future (Dividend). In... If you want to get a full essay, order it on our website: Orderessay

If you want to get a full essay, wisit our page: write my essay .