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- Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Five years of realized returns for Celestial Crane Cosmetics Inc. (Crane Cosmetics) are given in the following table: 2012 2013 2014 2015 2016 Stock return 23.75% 16.15% 28.50% 39.90% 12.35% Also note that: 1. While Crane Cosmetics was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on Crane Cosmetics's equity are calculated as arithmetic returns. Given this return data, the average realized return on Celestial Crane Cosmetics Inc.’s stock is . The preceding data series represents of Crane Cosmetics’s historical returns. Based on this conclusion, the standard deviation of Crane Cosmetics’s historical returns is . If investors expect the…Go to Yahoo.com’s financial website and enter Apple, Inc.’s stock symbol, AAPL. Answer the following questions concerning Apple, Inc. At what price did Apple’s stock last trade? What is the 52-week range of Apple’s stock? When was the last time Apple’s stock hit a 52-week high? What is the annual dividend of Apple’s stock? How many current broker recommendations are strong buy, buy, hold, sell, or strong sell? What is the average of the broker recommendations? What is the price-earnings ratio?Using the data in the following table.. calculate the return for investing in Boeing stock (BA) from January 2, 2008, to January 2, 2009, and also from January 3, 2011, to January 3, 2012, assuming all dividends are reinvested in the stock immediately. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Historical Stock and Dividend Data for Boeing Dividend Date 1/3/2011 2/9/2011 5/11/2011 8/10/2011 11/8/2011 1/3/2012 Date 1/2/2008 2/6/2008 5/7/2008 8/6/2008 11/5/2008 1/2/2009 Price $86.38 $79.22 $83.82 $64.57 $47.65 $44.12 $0.39 $0.39 $0.39 $0.00 Price $67.65 $73.66 $78.78 $57.99 $66.39 $75.53 Dividend $0.43 $0.43 $0.43 $0.43 X
- Your stockbroker, John Smith, calls you with a hot stock tip to buy SMITH Inc. The stock is currently selling for $25 a share. You gather the following data to evaluate Smith's recommendation. The risk free rate is 3%, and you demand a 14% return on the market portfolio. SMITH's current dividend is $2.50 a share. You decide to get other necessary estimates from a third-party, Rocky Enterprises. Rocky has estimated that SMITH's beta is 2.0 and that the stock's dividend will grow at a constant 10 percent rate. Based on your estimates, is Smith's recommendation to buy SMITH a good one? What do you think the stock is worth?You have risen through the ranks of a coffee comany, from the lowly green-apron barista to the coveted black apron, and all the way to CFO. A quick internet check shows that your company's beta is 0.68. The risk-free rate is 5.8% and you believe the market risk premium to be 5.7%. What is your best estimate of investors' expected return on your company's stock (its cost of equity capital)? The expected return is %. (Round to two decimal places.)Question 2: On November 1, 2021, Mr. Daniel Kim, an individual stockinvestor, pays attention to the news that Dongguk Corp. may report an earnings surprise thanks to the booming demand for natural gas pipe associated with rising shale gas production in the US. In order to make an investment judgement through a price multiple comparison method, Mr. Kim chooses to deploy PER (Price-Earnings Ratio) computed as following: PER per share stock price of Dongguk Corp. November 1, 2021) / expected per share net income for the fiscal year of 2021 For comparison purpose, Mr. Kim selects 5 firms that belong to the same industry as Dongguk Corp. that are also similar in firm size, and calculates the average PER using above formula. As a result, Mr. Kim gets a multiple of 15 for Dongguk Corp, whereas the average multiple of those five firms is 12. Based on this multiple comparison, Mr. Kim concluded that the stock market overprices the shares of Dongguk Corp. and gives up investment in Dongguk Corp.…
- Situation: Your friend came to you for advice whether or not to invest in a particular stock which promises a profit of Php200,000 a year with a probability of 30% or take a loss of Php50,000 with a probability of 70%. Your advice must be anchored on the expected gain based on the information provided by your friend. Prepare a very simple report to be discussed with your friend. You may follow the suggested format below. Advice: Invest/Do not invest Expected Profit: Php_ Computations:If this company’s stockturn rate was 3.5 last year, is the stockturn rate calculated in the previous question better or worse? Discuss. (AACSB: Written and Oral Communication; Reflective Thinking)Your friend Carra is interested in investing in Spark common stocks. She knows that you are taking finance and have learned about stock valuation using historical dividends information. Carra has collected the following dividends data on Spark and asked for your help to calculate the stock price of this company. Use the Constant Growth Dividend model you learned to perform stock valuation for this company. Use the past dividends data to estimate the constant growth rate (it is assumed that the dividends will grow at its historical average growth rate from now onwards) for the dividends. Under the assumption that Spark will continue this dividend pattern forever and Carra wants to earn an annual rate of return of 11% on this investment, what price would Carra be willing to pay for the stock price of this company? What happens to the stock price that Carra would be willing to pay if her required rate of return is 15% (which is greater than 10%)? Briefly interpret your answers.…