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
Related questions
Question
100%
From the information attached below, calculate:
a. the average stock return from 20x1- 20x3.
b. The standard deviation over the same period.
Transcribed Image Text:+
Corporation A
Common Stock: The firm has 400,000 shares authorized and 100,000 shares issued
at year-end 20X1, 20X2, and 20X3.
Treasury Stock: The firm purchased 1,000 shares of treasury stock at year-end 20X1,
12,000 at year-end 20X2, and 20,000 at year-end 20X3.
Market Valuation: The market price of the stock was $31 at year-end 2006, $35 at
year-end 20X1, $42 at year-end 20X2, and $55 at year-end 20X3. o
For valuation purposes, industry experts use the dividend valuation model to value
the common equity interest of industry firms. Potential investors' required rate of
return for this firm is 14%; growth rate is 13% for 20X4 and 20X5, and then declines
to 12% for all later years.
Market Returns: The stock returns for the market as a whole were as follows: 15.7%
in 20X1, 8.2% in 20X2, and 12.1% in 20X3.
Transcribed Image Text:Return on Equity
Dividend Payout
Return on Assets
Return on Sales
Asset Turnover
Current Ratio
Quick Ratio
Corporation A
Firm and Industry Financial Ratios
Debt/Assets
Accounts Receivable Days
Inventory Days
Accounts Payable Days
Summary: Cash Conversion Days
20X3
0.27
0.18
0.10
0.11
0.92
1.39
0.75
0.70
26.40
60.91
25.59
61.71
20X3/20X2
20X2 Industry
0.19
0.15
0.09
0.12
0.77
3.46
2.46
0.53
27.11
70.23
31.73
65.61
0.14
0.10
0.10
0.11
1.02
2.35
1.75
0.35
19.50
41.50
28.40
32.60
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