Looking at the annexure, it can be said that the required rate of return for Newcrest Mining Limited is 1.35%, whereas, for Orica limited it is 9.35%. It reveals that, if the required rate of return is to be considered, Orica limited is much better than Newcrest mining limited and the investor shall invest in Orica Limited (Zabarankin, Pavlikov & Uryasev, 2014). Further, the stock value of Newcrest mining limited is underpriced as measured under the constant dividend growth model, whereas the value of stock for Orica limited is overpriced as compared with the constant dividend growth model. However, if the holding period return is to be taken into consideration, it is recognized that the monthly holding period return for Newcrest mining limited is 6.6% and for Orica limited it is 0.425% (Orica - Clever Resourceful Solutions, 2017). It is clearly recognized that the holding period return of Newcrest mining limited is better as compared to Orica limited. Thus, if the investor is planning for the long-term investment then he must invest the fund in Newcrest mining limited and if the investor is willing to get regular return, he must invest in Orica Limited (Barberis, Greenwood, Jin & Shleifer, 2015). In the given circumstance, the investor wants to invest AUD 120 million and is looking for investing over 10 years period that is for long-term period. Thus, the investor must invest the available fund in Newcrest mining limited as the holding period return of this entity is better as compared to Orica limited (adenergy.com.au, 2017).
Barberis, N., Greenwood, R., Jin, L., & Shleifer, A. (2015). X-CAPM: An extrapolative capital asset pricing model. Journal of Financial Economics, 115(1), 1-24.
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Zabarankin, M., Pavlikov, K., & Uryasev, S. (2014). Capital asset pricing model (CAPM) with drawdown measure. European Journal of Operational Research, 234(2), 508-517.