Question 6 The mid-year convention used to account for the fact that annual FCF is usually received throughout the year rather than at year-end results in: Higher implied share price, everything else constant. Same implied share price as with the year-end convention. Lower implied share price, everything else constant. Erroneous estimation of the implied share price.

Question 6 The mid-year convention used to account for the fact that annual FCF is usually received throughout the year rather than at year-end results in: Higher implied share price, everything else constant. Same implied share price as with the year-end convention. Lower implied share price, everything else constant. Erroneous estimation of the implied share price.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year. The risk-free rate (rRF) is 5.00%, the market risk Value Term premium (RPM) is 6.00%, and Portman's beta is 1.90. Dividends one year from now (D1) Horizon value (P1) Assuming that the market is in equilibrium, use the Intrinsic value of Portman's stock information…
The following limited information is available for returns on two shares listed on the Lusaka Securities Exchange (LuSE) in Zambia. Year Gipley Petros 2001 0.20 0.16 2002 0.28 0.12 2003 0.36 0.10 2004 0.12 0.18 Despite the limited number of readings, a normal distribution of returns may be assumed, In addition, past performance is considered to reflect expected future performance. Required, a) Calculate for each of the shares; i. The average return ii. Standard deviation iii. Coefficient of variation b) Taking the role of an investment advisor, recommend one of the two shares to a client who wishes to make a choice between an investment in Gipley Ltd or an investment in Petros Ltd. Advise the client of some of the issues which should be considered.
Question 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. YEAR Centrica plc National Express Group plc Market Portfolio, M 2002 224.7 151.5 199.5 205.8 292.6 187.4 3940.4 2003 4476.9 4814.3 5618.8 6220.8 6456.9 4434.2 5412.9 2004 337.7 2005 2006 2007 2008 235.5 327.6 293.0 256.1 465.2 451.7 545.4 607.1 168.8 207.1 243.6 2009 2010 2011 2012 2013 268.1 317.8 291.6 348.3 309.6 5899.9 5572.3 5897.8 6749.1 216.1 206.5 290.9 2014 6566.1 6242.3 7142.8 2015 292.5 254.9 2016 204.0 301.9 223.5 133.1 136.1 2017 337.8 7687.8 2018 366.2 393.9 6728.1 7542.4 2019 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (82 x o, the non-systematic risk (o2) – (8? x o?) and the total risk (of) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns? (c)…
4. When preference share is cumulative, preferred dividends not declared in a period are a. called dividends in arrears b. Distribution of earnings c. never paid d. considered a liability
Question 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. | YEAR Centrica plc National Express Group plc Market Portfolio, M 2002 224.7 292.6 187.4 337.7 465.2 451.7 3940.4 151.5 199.5 2003 4476.9 2004 4814.3 2005 2006 205.8 5618.8 6220.8 6456.9 4434.2 235.5 2007 2008 327.6 293.0 256.1 268.1 545.4 607.1 2009 168.8 5412.9 207.1 243.6 216.1 5899.9 5572.3 5897.8 6749.1 2010 2011 2012 2013 317.8 291.6 348.3 309.6 292.5 204.0 223.5 133.1 206.5 2014 290.9 6566.1 6242.3 7142.8 7687.8 6728.1 7542.4 2015 2016 2017 254.9 301.9 337.8 2018 366.2 2019 136.1 393.9 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (B2 x a, the non-systematic risk (o) – (B? x o2) and the total risk (of) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns? (c)…
ak.4
QUESTION 13 The most common practice is a variation of the: O a. residual theory of dividends O b. constant dividend payout ratio Oc. stable dividend policy O d. low dividend plus extra policy
Plz. Solve both
solve plz !!!
QUESTION 11 Which of the following statements is true? O A. The DuPont Identity is used to calculate Return on Assets. O B. A company can imporve their P/E ratio by improving their EPS. OC.A Market to Book ratio greater than 1 always means the stock is undervalued. O D. All of the statements are false.
D. 7.69 percent E 8.26 percent 16. An increase in which of the following would increase the price of a call option on common stock, all else equal? L Stock price I1. Stock price volatility IIL. Interest rates IV. Exercise price A II only B. II and IV only C. I, II, and III only D. 1, 1IL and IV only E. I, II, III, and IV

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