Investments, 11th Edition (exclude Access Card)
Investments, 11th Edition (exclude Access Card)
11th Edition
ISBN: 9781260201543
Author: Zvi Bodie Professor; Alex Kane; Alan J. Marcus Professor
Publisher: McGraw-Hill Education
Question
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Chapter 28, Problem 6CP

A

Summary Introduction

To explain: Objectives and constrains of the investment policy.

Introduction: F is the president of the R firm, having Investments, 11th Edition (exclude Access Card), Chapter 28, Problem 6CP as a salary. She has no family and no residue debts. For the investment some constrains are used like risk management, benchmarks etc.

B

Summary Introduction

To explain: Demerits of coastal proposal in investment policy.

Introduction: A coastal method is used to investment for person S, but this method gets failure.

C

Summary Introduction

To explain: Suitability of allocation of assets.

Introduction: Best allocation of the assets is decided by the low risk management with high returns after a period of time.

D

Summary Introduction

To calculate: Sharpe ratio for the investment portfolio.

Introduction: Sharpe ratio is defined as the risk premium with respect to the total risk of the portfolio. In other words Sharpe ratio is also called as reward to volatility ratio.

E

Summary Introduction

To explain: Justify the selection of asset allocation.

Introduction: Best allocation is that allocation which provides higher returns with minimum risk in portfolio.

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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05
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