ProblemsBETA COEFFICIENTS AND RATES OF RETURN You are given the followingset of data:8A-1Historical Rates of Return (7)YearStock Y(F,)NYSE (r.)13.0%4.0%218.214.39.119.04(6.0)(14.7)5(15.3)(26.5)33.137.26.123.83.2(7.2)14.86.61024.120.51118.030.6Mean9.8%9.8%13.819.6a. Construct a scatter diagram graph (on graph paper) showing the rela-tionship between returns on Stock Y and the market, as shown inFigure 8A.1; then draw a freehand approximation of the regressionline. What is the approximate value of the beta coefficient? (If you havea calculator with statistical functions, use it to calculate beta.)b. Give a verbal interpretation of what the regression line and the betacoefficient show about Stock Y's volatility and relative riskiness ascompared with other stocks.c. Suppose the scatter of points had been more spread out, but theregression line was exactly where your present graph shows it. Howwould this affect (1) the firm's risk if the stock were held in a one-asset portfolio and (2) the actual risk premium on the stock if theCAPM held exactly? How would the degree of scatter (or the correla-tion coefficient) affect your confidence that the calculated beta willhold true in the years ahead?d. Suppose the regression line had been downward sloping and the betacoefficient had been negative. What would this imply about (1) StockY's relative riskiness and (2) its probable risk premium?e. Construct an illustrative probability distribution graph of returns (seeFigure 8.3) for portfolios consisting of (1) only Stock Y, (2) 1% eachof 100 stocks with beta coefficients similar to that of Stock Y, and (3)all stocks (i.e., the distribution of returns on the market). Use as theexpected rate of return the arithmetic mean as given previously forboth Stock Y and the market, and assume that the distributions arenormal. Are the expected returns “reasonable"; that is, is it reasonablethat îy = fy = 9.8%?f. Now, suppose that in the next year, Year 12, the market return was27%, but Firm Y increased its use of debt, which raised its perceivedrisk to investors. Do you think that the return on Stock Y in Year 12could be approximated by this historical characteristic line?î, = 3.8% + 0.62(r,) = 3.8% + 0.62(27%) = 20.5%g. Now, suppose r, in Year 12, after the debt ratio was increased, hadactually been 0%. What would the new beta be, based on the mostrecent 11 years of data (i.e., Years 2 through 12)? Does this beta seemreasonable-that is, is the change in beta consistent with the otherfacts given in the problem?

BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: Historical Rates of Return (7) Year Stock Y(F,) NYSE (F,) 3.0% 4.0% 18.2 14.3 9.1 19.0 (6.0) (14.7) 5. (15.3) (26.5) 6. 33.1 37.2 7 6.1 23.8 8. 3.2 (7.2) 9. 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Мean 9.8% 9.8% 13.8 19.6 a. Construct a scatter diagram graph (on graph paper) showing the rela- tionship between returns on Stock Y and the market, as shown in Figure 8A.1; then draw a freehand approximation of the regression line. What is the approximate value of the beta coefficient? (If you have a calculator with statistical functions, use it to calculate beta.)

BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: Historical Rates of Return (7) Year Stock Y(F,) NYSE (F,) 3.0% 4.0% 18.2 14.3 9.1 19.0 (6.0) (14.7) 5. (15.3) (26.5) 6. 33.1 37.2 7 6.1 23.8 8. 3.2 (7.2) 9. 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Мean 9.8% 9.8% 13.8 19.6 a. Construct a scatter diagram graph (on graph paper) showing the rela- tionship between returns on Stock Y and the market, as shown in Figure 8A.1; then draw a freehand approximation of the regression line. What is the approximate value of the beta coefficient? (If you have a calculator with statistical functions, use it to calculate beta.)

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 20PC

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Exhibit 7.1USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Rates of Return Year RA Computer Market Index 1 13 17 2 9 15 3 –11 6 4 10 8 5 11 10 6 6 12 Refer to Exhibit 7.1. The equation of the characteristic line for RA is a. RRA = –7.98 + 1.1023RMI. b. RRA = –9.41 + 1.3893RMI. c. RRA = –4.92 – 0.7715RMI. d. RRA = 11.63 + 1.2195RMI. e. RRA = 4.92 + 0.7715RMI.
Year Discounting factor 0 1.00 1 0.8928571428 2 0.7971938775 3 0.7117802478 4 0.6355180784 Base on the image and the table: How do i calculate the payback peridod (using years)?
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YYYYMM Return(Stk1) Return(Stk2) Return(Market) Return(T-bill) 201701 7.75% 3.00% 6.18% 0.20% 201702 1.27% 2.12% 1.63% 0.20% 201703 7.63% 1.50% 1.56% 0.15% 201704 9.25% -1.01% 2.09% 0.30% 201705 10.20% 2.66% 4.25% 0.30% 201706 4.33% 2.59% 0.41% 0.30% 201707 12.25% 10.41% 6.05% 0.35% 201708 4.98% -2.94% 2.37% 0.45% 201709 2.19% -1.69% -1.49% 0.20% 201710 4.05% 3.43% 2.51% 0.20% 201711 13.78% 8.29% 3.30% 0.15% 201712 2.01% 1.96% 2.54% 0.30% 201801 14.19% 23.60% 9.92% 0.30% 201802 -6.77% -4.18% -6.21% 0.55% 201803 -5.23% -10.14% -2.44% 0.60% 201804 -4.54% 1.93% 2.38% 0.20% 201805 2.32% -1.32% -1.10% 0.20% 201806 -1.35% -7.01% -4.97% 0.15% 201807 -9.80% -1.86% -1.29% 0.30% 201808 -4.28% -1.95% -2.43% 0.30% 201809 -4.94% 0.27% -0.36% 0.75% 201810 -17.39% -7.14% -10.11% 0.30% 201811 16.85% 9.62% 6.11% 0.55% 201812 0.64% -0.61% -2.49% 0.60% 201901 10.19% 7.68% 8.11% 0.20% 201902 -2.95% 10.90% 2.47% 0.20% 201903 7.50% 2.26% 1.46% 0.20%…
PLASMA SCREENS CORPORATION Balance Sheets December 31, 2021 and 2020 2021 2020 Assets Current assets: Cash Accounts receivable Inventory Investments $242,000 98,000 105,000 5,000 $ 130,000 102,000 90,000 3,000 Long-term assets: Land Equipment Less: Accumulated depreciation 580,000 890,000 (528,000) $1,392,000 580,000 770,000 (368,000) $1,307,000 Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payab le Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings $ 109,000 7,000 9,000 95,000 13,000 6,000 2$ 110,000 220,000 800,000 357,000 $1,392,000 $1,307,000 800,000 173,000 Total liabilities and stockholders' equity Additional information for 2021: 1. Net income is $184,000. 2. Sales on account are $1,890,000. 3. Cost of goods sold is $1,394,250.
Calculate : M2 measure T2 measure Information Ratio (appraisal ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000
Required: Compute the following: (For Requirements 1 to 4, enter your percentage answers rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity. 5. Was financial leverage positive or negative for the year? 1. Gross margin percentage % 2. Net profit margin percentage % 3. Return on total assets % 4. Return on equity % 5. Financial Leverage
The returns on AA Berhad and BB Berhad are given below, State of Economy Probability of Return (%) AA Return (%) BB occurring Berhad Berhad 1 0.30 6 -15 0.50 10 18 3 0.20 17 40 Calculate: a) Expected return E(R) for i) АА Beфad ii) ВВ Behad b) Standard deviation for i) AA Berhad ii) ВВ ВBehad c) Discuss any FOUR (4) benefits of diversification by referring to AA and BB Berhad.
Economics Compute (F/A, %13,20) using the closed-form formula and call that X, Also approximate it; by applying linear interpolation between the values obtained from "compound interest factors" table for (F/A,%12,20) and (F/A,%15,20) and call that Y. What is X-y? Choose the closest value to your answer. A 11.3664 C 1.2358 D -1.2358 11.3664
Assignment 1: Financial Statement Analysis and Interpretation of the Results • Select two different corporations (from the same industry) publicly traded in the US Stock Exchange Markets. (NYSE, NASDAQ) o Make sure the companies you select are traded in same currency (USD, Euro, GBP) o Please get the approval for the names of the firm before you start your work. • The analysis of same company by different students will not be graded • Download the necessary financial statements for the companies for 2021 and 2020 o For data collection you can use: finance.yahoo.com or finance.google.com Part 1: Apply the financial analysis for the last two years using ratios covered in Chapter 3. Use excel formulas for calculation of the ratios on a separate sheet (manual calculations will not be graded!) You are not responsible for Part 5 (V. Market Value) ratios Some companies may not have all the data due to their variations in industries. If you face missing data just skip that ratio (mention as…
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