4. Measuring standalone risk using realized dataReturns 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 Blue Llama Mining Inc. (Blue Llama) are given in the following table:2016201720182019Stock return 10.00% 6.80% 12.00% 16.80%Also note that:20205.20%1. While Blue Llama was started 40 years ago, its common stock has been publicly traded for the past 25 years.2. The returns on Blue Llama's equity are calculated as arithmetic returns.Given this return data, the average realized return on Blue Llama Mining Inc.'s stock isThe preceding data series represents a sample of Blue Llama's historical returns. Based on this conclusion, the standard deviation of Blue Llama'shistorical returns isIf investors expect the average realized return on Blue Llama Mining Inc.'s stock from 2016 to 2020 to continue into the future, its expected coefficientof variation (CV) is expected to equal

Standard deviation is the measure of risk and can be measured as the deviation from the mean return…

Answered: turns earned over a given time period…

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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Cc. 205
Given the information below for Seger Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year Price EPS CFPS SPS 2016 $ 88.60 2.55 7.47 45.10 Using PE ratio Using P/CF ratio Using P/S ratio 2017 $ 94.50 3.26 8.40 50.10 2018 $ 93.20 4.06 8.83 49.50 Share Price 2019 2020 2021 $90.70 $112.20 $127.60 4.76 10.32 53.00 7.20 11.92 64.20 8.201 13.18 72.20
If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company: Year 1 Year 2 Year 3 Year 4 High $87.93 $100.35 $121.89 $133.60 Low price 69.85 83.19 79.99 110.18 EPS 6.54 8.96 8.62 10.21 Earnings are expected to grow at 5.5 percent over the next year. a. What is the high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. High target price b. Low target price price
Integrative Risk and valuation Giant Enterprises' stock has a required return of 13.9%. The company, which plans to pay a dividend of $2.01 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over 2013-2019 period, when the following dividends were paid: a. If the risk-free rate is 3%, what is the risk premium on Giant's stock? b. Using the constant-growth model, estimate the value of Giant's stock. (Hint: Round the computed dividend growth rate to the nearest whole percent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. a. If the risk-free rate is 3%, the risk premium on Giant's stock is %. (Round to one decimal place.)
If the firm's dividend policy was based on a constant payout ratio of 50 percent for all of the years with earnings over P1.50 per share and a zero payout otherwise, the annual dividend for 2020 were
sach.2
Faux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 1. Calculate the cost of equity using SML
None
Given the information below for Seger Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year Price EPS CFPS SPS 2016 $61.10 Using PE ratio Using P/CF ratio Using P/S ratio 3.35 8.12 31.20 2017 $67.00 4.06 8.92 36.20 $ $ 2018 $ 65.70 4.86 9.22 35.60 Share Price 0.17 0.11 2019 2020 $ 63.20 $ 84.70 5.56 7.85 10.97 12.31 39.10 50.30 2021 $100.10 8.85 13.44 58.30
An investor is interested in purchasing XYZ share which is currently trading at a market price of P200 in the stock market. An analyst determined that the said stock is overvalued as the market price is P50 more than its intrinsic value. 2% constant growth percentage is projected for this stock and a return of 12% is noted for stocks similar with XYZ. How much is the per share dividend expected to be declared at the end of the year?
Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place. 26. The historical stock returns for GAF, Inc. are listed below: Year -Annual Stock Return2013 -12%2014 14%2015 35%2016 2%2017 -16%2018 8%2019 0%2020 34%2021 12%2022 6% What is the standard deviation of returns for GAF, Inc. stock over the 10-year time period? (Compute the standard deviation assuming this is a population of returns, not a sample – that is, use the procedure describedin the textbook for calculating the standard deviation of a series of stock returns).27. The end of year stock price and the dividend paid each year for Maxwell, Inc. stock for years 0 through 6 arelisted in the table below: Year -End of Year Stock Price- Dividend0 $12.00 $ 01 $14.86 $1.802 $7.95 $1.883 $8.00…
Integrative Risk and valuation Giant Enterprises' stock has a required return of 14.8%. The company, which plans to pay a dividend of $2.93 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over 2013-2019 period, when the following dividends were paid: a. If the risk-free rate is 5%, what is the risk premium on Giant's stock? b. Using the constant-growth model, estimate the value of Giant's stock. (Hint: Round the computed dividend growth rate to the nearest whole percent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. a. If the risk-free rate is 5%, the risk premium on Giant's stock is%. (Round to one decimal place.) C

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