CORP FIN--CONNECT ONLY+PROCTORIO+180 DAY
CORP FIN--CONNECT ONLY+PROCTORIO+180 DAY
12th Edition
ISBN: 9781266118562
Author: Ross
Publisher: MCG
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Chapter 9, Problem 5MC
Summary Introduction

Case summary: In order to better integrate its supply chain and get more control over engine features, Larissa has determined that East Coast Yachts should consider buying an engine manufacturer. After looking at several potential businesses, Larissa believes that buying Ragan Engines Inc., is a possibility. She has requested a value assessment of Ragan from Dan Ervin. Carrington and Genevieve Ragan, a brother and sister team who started Ragan Engines Inc. nine years ago and have kept the business privately held. The business produces marine engines for a range of uses. Ragan has grown quickly as a result of proprietary technology that improves the engine’s fuel efficiency with little to any performance loss. Carrington and Genevieve each possess a proportional share of the business. The siblings were each given 150,000 shares of stock as part of the initial deal. Dan has been asked by Larissa to estimate the price per share of Ragan stock.

Characters in the case: Larissa, Dan, Ragan Engine Inc., Carrington and Genevieve, and Nautilus Marine Engines

Adequate information: Negative earnings per share (EPS) for Nautilus Marine Engines were caused by an accounting write-off from the previous year. EPS for the company would have been $2.07 without the write-off. In the previous year, Ragan had an EPS of $5.35 and distributed $320,000 in dividends to Carrington and Genevieve. The business also earned a 21% return on equity. Larissa informs Dan that an acceptable return for Ragan is 18% .

To determine: Future return on equity

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Please answer the following MCQS with explanations. I have also attached the formulas list, if needed.  1. You are assessing the average performance of two mutual fund managers with the Fama-French 3-factor model. The fund managers and the Fama-French factors had the following performance over this periodof time:                                 Manager 1          Manager 2           Rm − rf           smb          hmlAvg. (total) Ret        27%                    13%                      8%                  2%            6%βmkt                        2                          1                           1                      0               0s                               1                          -0.5                       0                     1                0h                               1                          0.5                        0                     0                1 The risk-free rate is 2%. Based on the Fama French 3-factor model, which manager is better?…
Please answer the following MCQS with explanations. I have also attached the formulas list, if needed.  1. If your mutual fund manager generates returns that earn a statistically significant CAPM alpha, is it necessarily true that they are really “beating the stock market”? Group of answer choices: -No, you will only find a significant CAPM $\alpha$ when you do not have a long data sample -Yes, assuming you have enough data to generate reliable estimates of alpha and beta -Yes, CAPM alpha means the asset is earning return that is not explained by exposure to the market -No, it depends on the beta of the stock -No; a missing risk factor could explain the manager's performance 2. You are assessing the average performance of two mutual fund managers with the Fama-French 3-factor model. The fund managers and the Fama-French factors had the following performance over this periodof time:                                 Manager 1          Manager 2           Rm − rf           smb…
Please help with 8-15

Chapter 9 Solutions

CORP FIN--CONNECT ONLY+PROCTORIO+180 DAY

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