Example: Comparision company (pure play) approach General Conglomerates evaluates an oil exploration project proposed by the manager of its aviation division. Calculate the correct discount rate to use to evaluate the project. Assume that there are no taxes and all debt is risk free. The risk free rate is 7% and the market risk premium equals 8%. Company General American Oil Louisiana Land and Expl. Mesa Petroleum Murphy Oil Natomas Oceanic Exploration Superior Oil Equity Beta 1.81 1.29 2.36 1.60 1.84 1.53 1.35 E/(D+E) 0.85 0.88 0.63 0.73 0.65 0.77 0.84

Q: .) From the data below, determine the Microsoft Corporation's - (a) Find arithmetic average return…

A: year Return(%) 2011 18% 2012 21% 2013 16% 2014 11% 2015 19% 2016 22% 2017 12% 2018…

Q: What does a share’s beta of 1.5 mean? Is this share more or less volatile than the market? Explain…

A: a) Beta of a stock is used to determine its volatility with respect to the market. A stock which is…

Q: Suppose the representative firm of the economy has a production function of the form F(K, N) =…

A: given   the economy has a production function of the form F(K, N) =AK^0.5N^ 0.5 . The marginal…

Q: The constant growth dividend discount model (DDM) may be written as fo=D₁/(P₁ + 8) Po=D₁/(r₁-8) P =…

A: Dividend Discount model is used for calculation of current market price per share based on future…

Q: IRR, NPV, WACC,

A: Thank you for posting questions. Since you have posted multiple questions, as per the guideline I am…

Q: In a Balanced Scorecard, what perspective would a measure of the number of repeat orders be most…

A: option b is correct. there are 4 perspectives in balance scorecard   perspectives measures…

Q: Date January 6 January 13 January 20 January 27 February 3 February 10 February 17 February 24 March…

A: The Sum of Squared Residuals (SSR) is a measure of the difference between the observed values and…

Q: write Advantages and Disadvantages of. Residual Dividend Model by an organization.

A: Residual dividend policy is the policy in which the earnings of the company are first used for the…

Q: Financial ratios derived from accounts are unit free. How will you use financial ratios to analyze…

A: Financial ratio is used to compare  two or more financial data that is used to analyze the…

Q: What are the factors favoring a high-dividend policy?

A: Dividend refers to portion of net earnings of the company that is shared with common stock holders…

Q: a. Calculate the expected return for a share in S.  b. Calculate the standard deviation of a share…

A: (a) Calculating the expected return for a share in S:

Q: What graphs/equations expalin how a firms operating leverage affects its beta?

A: Operating leverage refers to the extent to which a firm uses fixed costs in its operations, while…

Q: Ex) Explain why do we use different Brownian motions for the stock price S(t) and X(t) in the…

A: In the Feynmann-Kac representation formula, Brownian motion is used to model the random evolution of…

Q: How do you calculate the Treynor ratio for the AMD stock?

A: Treynor ratio is referred to as the portfolio performance, which used to measure regarding the…

Q: Which of the following variables do Fama and French claim do a better job explaining stock returns…

A: The Fama French model is an important asset pricing model. This model is basically an expansion of…

Q: sing the single factor model for firm with a Beta of 1 and when the standard deviationof the market…

A: If the beta of a firm's stock is 1, it means there is a risk or standard deviation of the firm…

Q: Which among the stakeholders gets the higher dividend?

A: Dividend refers to that portion of the profits which is distributed among the shareholders as a…

Q: . A firm, its debt, and equity have β of 1.0, 0.5, and 3.0, respectively. What is the firm’s equity…

A: The question is based on the concept of firm (asset) beta calculation and equity ratio.

Q: Briefly discuss clientele theory and signaling theory of dividend policy

A: Dividend policy  of a company is the policy to either retain or distribute the profit of a company.…

Q: Briefly discuss dividend relevance and dividend irrelevance. Theory  M&M = arguments

A: STEP 1 The impact of dividends on a company's value is the subject of dividend theories. One type of…

Q: PS = 5 + (3 ×?×β )

A: False

Q: What inputs are required for the dividend growth approach?

A: Dividend: The dividend is the amount paid to buy the company to its shareholders out of its…

Q: Consider the following regression Pt * - Pt = .07(1.4) + .4*Pt (3.6) + et where Pt * is Shiller’s ex…

A: The efficient markets theory is a theoretical framework that explains the functioning of financial…

Q: How do you set up a two-stage dividend growth model on excel?

A: Companies with an uncertain initial growth rate can be valued using the two-stage model. In the…

Q: can you explain what is "GME, Melvin Capital and the “Gamma Squeeze”

A: GME, Melvin Capital and the ‘Gamma Squeeze’ have an important relevance in the world of finance.…

Q: How do you calculate the value at a node in a binomial tree? A. As a present value of the two…

A: A binomial tree is a graphical representation of the different intrinsic values that an option could…

Q: The SSO ETF is a X2 power share on the S&P500. What would you expect the correlation to be between…

A: The Standard and Poor's 500 also known as the S&P 500 is a stock market index which tracks the…

Q: you have been provided with the following data D1=$1.27 PO=60 and G=8 constant. What is the cost of…

A: Discounted cash flow (DCF) refers to a valuation method that estimates the value of an investment…

Q: beta for a stock

A: Introduction: Beta can be defined as a metric which helps in measuring the volatility of a stock…

Q: What is the importance of knowing the value of the preference share using the zero-growth model?

A: Zero Growth Model: Zero Growth Model is a Valuation Model for valuation of securities which provide…

Q: Discuss the Weighted Average Cost of Capital (WACC). Why do firms calculate their weighted average…

A: WACC- Weighted average cost of capital (WACC) is the rate that a company is expected to pay on…

Q: provide a 2 unique problem with own solution in YIELD performance ratio with explanation. Use this…

A: Dividend Yield is calculated by dividing Dividend per share by Market Price per share. It is…

Q: How do you calculate the beta of stock?

A: Beta is the measure of stock's volatility to the overall market, and is calculated as-

Q: What is the significance of knowing growth rate per share using the Constant Growth Model?

A: Formula for stock valuation under constant growth model: Current price=Expected dividend (D1)Cost of…

Q: Explan unrealized profits as per IFRS10?

A: Introduction: The International Financial Reporting Standards (IFRS) 10 Consolidated Financial…

Q: Hello, which table would I use to find the ratio of exchange in a stock? I'm attaching the tables,…

A: Answer.   To find Ratio of exchange in shares ~ Table 4 NCC & Portable additional data would be…

Q: When using the two-stage dividend growth model,: Multiple Choiceg1 cannot be negative. Pt = Dt/R. g1…

A: Answer:In the two-stage dividend growth model, g1 must be greater than R.Therefore option D is…

Q: E(R) stocks M E(RM) stocks What is the slope of the graph?

A: Ordinary least squares method- 'OLS' tries to compute the intercept coefficient (b0⏞) and the slope…

Q: what levered beta is and how to to calculate it

A: Beta is the systematic risk of a security or the portfolio. Systematic risk of a stock refers to…

Q: Given market data in Table 2 below Table 2: Market Quantity Supplied and Demanded Data for Good X…

A: Step 1:First we have to oberve the relation between P and Qs  According to the table , P = price ,…

Q: oes cost

A: Cost of capital : The required return on capital, especially as the expense of developing a new…

Q: What is the difference between stock price indexes that are simple averages of prices and those that…

A: A stock index, often known as a stock market index, is a financial index that monitors a stock…

Q: how do we calculate dividend when there is eps retention ratio and dps retention ratio?

A: The dividend payment to the shareholders based on the company's earnings and its dividend payout…

Q: You have learnt: Po k-gi9= ROE × b. 1. Derive the P/E ratio as a function of b 2. Prove that if ROE…

A: For deriving P/E ratio in terms of bP/E ratio refers to the Profit earing ratio of share holder from…

Q: How is pro forma income statement different from breakeven analysis Please give the answer in at…

A: The Pro Forma Income Statement is more relevant to start-ups and new businesses instead of the large…

Q: What are three ways to estimate the expected dividend growthrate?

A: Expected Dividend growth rate is the prospective growth expected by investors on the dividend paid…